<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 2, 1995 Commission file number 1-6187
ALBERTSON'S, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 82-0184434
- ------------------------ --------------------------------
(State of Incorporation) (Employer Identification Number)
250 Parkcenter Boulevard, P.O. Box 20, Boise, Idaho 83726
(208) 385-6200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------------------------------ -----------------------
Common Stock, $1.00 par value, 254,022,781 New York Stock Exchange
shares outstanding on March 31, 1995 Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (17 CFR section 405) is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, computed by reference to the price at which the stock was sold as
of the close of business on March 31, 1995: $6,210,893,114.
Documents Incorporated by Reference
-----------------------------------
Listed hereunder are the documents, any portions of which are incorporated by
reference, and the Parts of this Form 10-K into which such portions are
incorporated:
1. The Registrant's Annual Report to Stockholders for the fiscal year
ended February 2, 1995, portions of which are incorporated by
reference into Part II and Part IV of this Form 10-K; and
2. The Registrant's definitive proxy statement for use in connection with
the Annual Meeting of Stockholders to be held on May 26, 1995, (the
"Proxy Statement") to be filed within 120 days after the Registrant's
fiscal year ended February 2, 1995, portions of which are incorporated
by reference into Part III of this Form 10-K.
1
<PAGE> 2
Documents Incorporated by Reference
Part II
Item 5 - Market for the Registrant's Inside back cover of the Annual Report
Common Equity and Related to Stockholders for the year ended
Stockholder Matters February 2, 1995
Item 6 - Selected Financial Data Page 40 of the Annual Report to
Stockholders for the year ended
February 2, 1995
Item 7 - Management's Discussion and Pages 17 to 19 of the Annual
Analysis of Financial Report to Stockholders for the
Condition and Results of year ended February 2, 1995
Operations
Item 8 - Financial Statements and Pages 20 to 39 and page 41 of the
Supplementary Data Annual Report to Stockholders for
the year ended February 2, 1995
Part III
Item 10 - Directors and Executive The material contained under the
Officers of the Registrant headings "Election of Directors,"
"Nominees for Election as
Class III Directors," "Nominee for
Election as Class II Director,"
"Continuing Class I Directors,"
"Continuing Class II Directors" and
"Filing of Forms Pursuant to Section
16 of the Securities Exchange Act of
1934" in the Proxy Statement
Item 11 - Executive Compensation The material contained under the
headings "Summary Compensation Table,"
"Stock Option and Year-End Value
Table" and "Retirement Benefits" in
the Proxy Statement
Item 12 - Security Ownership of The material contained under the
Certain Beneficial Owners heading "Voting Securities and
and Management Principal Holders Thereof" in the
Proxy Statement
Item 13 - Certain Relationships and The material contained under the
Related Transactions heading "Certain Transactions" in
the Proxy Statement
Part IV
Item 14 - Exhibits, Financial Pages 20 to 39 and page 41 of the
Statement Schedules and Annual Report to Stockholders for
Reports on Form 8-K the year ended February 2, 1995
2
<PAGE> 3
ALBERTSON'S, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C> <C>
PART I
1. Business 4
2. Properties 5
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 7
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters 8
6. Selected Financial Data 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
8. Financial Statements and Supplementary Data 8
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 8
PART III
10. Directors and Executive Officers of the Registrant 9
11. Executive Compensation 11
12. Security Ownership of Certain Beneficial Owners
and Management 11
13. Certain Relationships and Related Transactions 11
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 12
</TABLE>
3
<PAGE> 4
PART I
Item 1. Business
General
The Registrant, Albertson's, Inc. (the "Company"), is incorporated under the
laws of the State of Delaware and is the successor to a business founded by J.
A. Albertson in 1939. The Company is the fourth largest retail food-drug chain
in the United States with operations in 19 Western, Midwestern and Southern
states. As of February 2, 1995, the Company operated 720 stores consisting of
588 combination food-drug stores, 88 conventional supermarkets and 44 warehouse
stores. Retail operations are supported by eleven Company-owned distribution
centers.
The Company's combination food-drug stores are super grocery/super
drugstores under one roof and range in size from 35,000 to 75,000 square feet.
Most of these stores offer prescription drugs and an expanded section of
cosmetics and nonfoods in addition to specialty departments such as service
seafood and meat, bakery, lobby/video, service delicatessen and floral. Food
and nonfood shopping areas are served by a common set of checkstands and
approximately equal amounts of selling space are devoted to each area.
The Company's conventional supermarkets range in size from 15,000 to 35,000
square feet. These stores offer a full selection in the basic departments of
grocery, meat, produce, dairy and limited nonfood lines. Many locations have
an in-store bakery and service delicatessen.
The Company's warehouse stores are operated primarily under the name "Max
Food and Drug." These no-frills stores range in size from 17,000 to 73,000
square feet and offer significant savings with special emphasis on discounted
meat and produce.
The Company's retail operations are organized into regions with each region
comprised of three to five divisions. A senior vice president who also serves
as a regional manager directs the operating divisions in retail strategies,
planning, marketing approaches and employee development. Each operating
division is managed by a division vice president or manager. The division
staff includes district sales managers responsible for an average of 20 stores
and merchandising specialists in areas such as grocery, produce, pharmacy,
liquor, general merchandise, bakery, meat and service delicatessen. District
sales managers, as well as store directors, are responsible for overall store
operations, and merchandising specialists serve as advisors to help maintain
adherence to overall division pricing and merchandising policies.
The Company's business is highly competitive. Competition is based
primarily on price, product quality and variety, service and location. There
is direct competition from many supermarkets, including independent stores and
local outlets of regional and national chains. Competition also exists with
respect to particular products from such retailers as convenience stores,
warehouse stores, drugstores and nonfood superstores.
The Company has been able to efficiently supply its stores with merchandise
through various means. Stores are provided with merchandise from the Company's
distribution centers, outside suppliers or directly from manufacturers in an
effort to obtain merchandise at the lowest possible cost. The Company
services all of its retail stores from Company-owned distribution centers.
4
<PAGE> 5
All of the Company's stores carry a broad range of national brands and offer
"Albertson's Brands" products in many merchandise categories. The Company's
stores emphasize everyday low prices and provide consumer information such as:
nutritional signing in the meat and produce departments, freshness code dating,
unit pricing and food information pamphlets. The Company also offers a choice
of recyclable paper or plastic bags and collection bins for plastic bag
recycling.
As of February 2, 1995, the Company employed approximately 76,000 people.
Approximately 42% of the employees are covered by collective bargaining
agreements. The Company considers its present relations with employees to be
satisfactory and intends to continue employee development and training,
employee benefit, wage and salary administration programs.
Albertson's stores are located in the Western, Midwestern and Southern areas
of the United States. The following is a summary of the stores by state as of
February 2, 1995:
<TABLE>
<CAPTION>
Albertson's Retail Stores
-------------------------
<S> <C>
Arizona 24
Arkansas 1
California 161
Colorado 46
Florida 82
Idaho 28
Kansas 4
Louisiana 14
Montana 8
Nebraska 6
Nevada 24
New Mexico 18
Oklahoma 17
Oregon 46
South Dakota 1
Texas 128
Utah 33
Washington 71
Wyoming 8
---
Total 720
===
</TABLE>
Item 2. Properties
The Company has actively pursued an expansion program of adding new retail
stores, enlarging and remodeling existing stores and replacing old stores.
During the past ten years, the Company has built or acquired 430 stores.
Approximately 93% of the Company's current square footage has been opened or
remodeled during the same period. The Company continues to follow the policy
of closing stores that are obsolete or lack satisfactory profit potential.
Prior to 1984 the Company financed a major portion of its stores under sale
and leaseback arrangements. The leases normally require the Company to pay for
property taxes, insurance and general maintenance. Some of the leases provide
for contingent rent in addition to minimum rent if sales exceed specified
amounts. Typically such leases contain renewal options which allow the Company
the right to extend the lease for varying additional periods.
Since 1984 the Company has financed most retail store construction
internally, rather than through sale and leaseback arrangements, thus retaining
ownership of its land and buildings. The Company plans to use future cash to
be provided by operating activities and short or medium-term financing to
continue expansion plans in the foreseeable future.
5
<PAGE> 6
As of year end, the Company operated 720 stores in the states discussed in
Item 1. An analysis of stores by division is as follows:
<TABLE>
<CAPTION>
Number
of Stores
---------
<S> <C>
Idaho (Southern Idaho (25), Northern Nevada (7),
Eastern Oregon (4) and Wyoming (1)) 37
Inland Empire (Eastern Washington (18),
Montana (8) and Northern Idaho (2)) 28
Utah (Utah (33) and Wyoming (1)) 34
Western Washington 49
Oregon (Western Oregon (42) and Washington (4)) 46
Southern California (California (92) and
Southern Nevada (17)) 109
Northern California 43
Rocky Mountain (Colorado (37), Wyoming (5),
and South Dakota (1)) 43
Southwest (Arizona (24), New Mexico (17), Texas (4)
and California (1)) 46
Midwest (Oklahoma (17), Nebraska (6) and Kansas (4)) 27
South Texas 34
North Texas (Texas (83), Louisiana (14)
and Arkansas (1)) 98
Florida 82
Max Food & Drug (California (25), Colorado (9),
Texas (7), Idaho (1), New Mexico (1) and Wyoming (1)) 44
---
720
===
</TABLE>
The following is a summary of stores, by classification, as of the indicated
fiscal year end:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Combination Food-Drug 588 536 506 407 364
Conventional Stores 88 96 106 123 136
Warehouse Stores 44 44 44 32 31
--- --- --- --- ---
Total 720 676 656 562 531
=== === === === ===
</TABLE>
The following table summarizes the Company's square footage by store type as
of the indicated fiscal year end (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Combination Food-Drug 29,217 26,602 25,159 19,647 17,589
Conventional Stores 2,524 2,741 3,009 3,471 3,800
Warehouse Stores 2,037 2,031 1,959 1,383 1,345
------ ------ ------ ------ ------
Total 33,778 31,374 30,127 24,501 22,734
====== ====== ====== ====== ======
</TABLE>
The Company has expanded and improved its distribution facilities in areas
where opportunities exist to improve service to the retail stores and generate
an adequate return on investment. During 1994, approximately 77% of the
merchandise purchased for resale in Company retail stores was received from
Company-owned distribution facilities.
6
<PAGE> 7
Albertson's distribution system consists of eleven Company-owned centers
located strategically throughout the Company's operating area. These units
operate as separate profit centers. The following is a summary of the
Company's distribution and manufacturing facilities as of February 2, 1995:
<TABLE>
<CAPTION>
Location Square Footage
-------- --------------
<S> <C>
Fort Worth, Texas
Groceries, Frozen Food, Produce, Meat and Deli 1,100,000
Brea, California
Groceries, Frozen Food, Produce, Liquor,
Bakery, Meat and Deli 1,059,000
Plant City, Florida
Groceries, Frozen Food, Produce, Liquor, Meat,
Deli and high volume Health and Beauty Care 954,000
Phoenix, Arizona
Groceries, Frozen Food, Produce, Liquor, Meat,
Deli and high volume Health and Beauty Care 687,000
Portland, Oregon
Groceries, Frozen Food, Produce, Meat and Deli 622,000
Sacramento, California
Groceries, Frozen Food, Produce, Liquor, Meat
and Deli 421,000
Ponca City, Oklahoma
Health and Beauty Care, General Merchandise
and Pharmaceuticals 419,000
Salt Lake City, Utah
Groceries, Frozen Food, Produce, Meat and Deli 406,000
Denver, Colorado
Groceries, Frozen Food, Produce, Meat and Deli 355,000
Boise, Idaho
Health and Beauty Care and General Merchandise 158,000
Ice Cream Plant 11,000
---------
Total 6,192,000
=========
</TABLE>
As of February 2, 1995, the Company held title to the land and buildings of
45% of the Company's stores and held title to the buildings on leased land of
an additional 7% of the Company's stores. The Company also holds title to the
land and buildings of the corporate headquarters in Boise, Idaho and all of the
distribution centers.
Item 3. Legal Proceedings
The final judgment granted by the trial court in favor of the Company in the
Super Food Services litigation was affirmed on appeal by the District Court of
Appeal for the State of Florida, Fifth District, on December 29, 1994, and
Super Food's Motion for Rehearing and/or Clarification was denied on January
30, 1995. There are no further possible appeals.
The Company is involved in routine litigation incidental to operations. In
the opinion of management, the ultimate resolution of these legal proceedings
will not have a material adverse effect on the Company's financial condition or
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of 1994 to a vote of
security holders through the solicitation of proxies or otherwise.
7
<PAGE> 8
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The principal markets in which the Company's common stock is traded and the
related security holder matters are set forth under the caption "Company Stock
Information" on the inside back cover of the Company's 1994 Annual Report to
Stockholders. This information is incorporated herein by this reference
thereto. The market value of the Company's common stock on March 31, 1995 was
$32.25 per share.
Item 6. Selected Financial Data
Selected financial data of the Company for the fiscal years 1990 through
1994 is included under the caption "Five Year Summary of Selected Financial
Data" on page 40 of the Company's 1994 Annual Report to Stockholders. This
information is incorporated herein by this reference thereto.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 17 to 19 of the Company's 1994 Annual Report to
Stockholders. This information is incorporated herein by this reference
thereto.
Item 8. Financial Statements and Supplementary Data
The Company's consolidated financial statements and related notes thereto,
together with the Independent Auditors' Report and the selected quarterly
financial data of the Company are presented on pages 20 to 39 and page 41 of
the Company's 1994 Annual Report to Stockholders and are incorporated herein by
this reference thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no reports on Form 8-K filed within 24 months prior to the
date of the most recent financial statements reporting a change of accountants
or reporting disagreements on any matter of accounting principle, practice,
financial statement disclosure or auditing scope or procedure.
8
<PAGE> 9
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The information regarding directors and nominees for directors of the
Company is presented under the headings "Election of Directors," "Nominees for
Election as Class III Directors," "Nominee for Election as Class II Director,"
"Continuing Class I Directors," "Continuing Class II Directors" and "Filing of
Forms Pursuant to Section 16 of the Securities Exchange Act of 1934" in the
Company's definitive proxy statement for use in connection with the 1995 Annual
Meeting of Stockholders (the "Proxy Statement") to be filed within 120 days
after the Company's fiscal year ended February 2, 1995, and is incorporated
herein by this reference thereto.
Executive Officers
<TABLE>
<CAPTION>
Age Date First Appointed
as of as an Executive
Name 3/31/95 Position Officer
---- ------- -------- --------------------
<S> <C> <C> <C>
Warren E. McCain 69 Chairman of the Executive 06/30/72
Committee of the Board
Gary G. Michael 54 Chairman of the Board and 12/02/74
Chief Executive Officer
John B. Carley 61 President and Chief Operating 04/05/76
Officer
Michael F. Reuling 48 Executive Vice President, 12/30/79
Store Development
Thomas R. Saldin 48 Executive Vice President, 12/26/83
Administration and
General Counsel
Thomas E. Brother 53 Senior Vice President, 07/30/89
Distribution
Richard L. King 45 Senior Vice President and 01/01/94
Regional Manager
A. Craig Olson 43 Senior Vice President, Finance 12/22/86
and Chief Financial Officer
Carl W. Pennington 57 Senior Vice President, 08/02/87
Corporate Merchandising
Allen R. Rowland 50 Senior Vice President and 08/07/89
Regional Manager
Patrick S. Steele 45 Senior Vice President, 06/10/90
Information Systems and
Technology
Ronald D. Walk 51 Senior Vice President and 05/28/84
Regional Manager
Steven D. Young 46 Senior Vice President, Human 12/02/91
Resources
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Age Date First Appointed
as of as an Executive
Name 3/31/95 Position Officer
---- ------- -------- --------------------
<S> <C> <C> <C>
David G. Dean 44 Group Vice President, 12/02/91
Procurement
Peggy Jo Jones 42 Group Vice President, Employee 11/29/93
Development and Communications
Richard J. Navarro 42 Group Vice President and 11/29/93
Controller
</TABLE>
Warren E. McCain became Chairman of the Executive Committee of the Board on
February 1, 1991. Previously, he served as Chairman of the Board and Chief
Executive Officer from December 6, 1976.
Gary G. Michael assumed the position of Chairman of the Board and Chief
Executive Officer on February 1, 1991. Previously, he held the positions of
Vice Chairman of the Board and Chief Financial and Corporate Development
Officer from 1984.
John B. Carley assumed additional responsibilities as Chief Operating
Officer on February 1, 1991. He has served as President since 1984.
Michael F. Reuling has served as Executive Vice President, Store Development
since 1986.
Thomas R. Saldin was promoted to Executive Vice President, Administration
and General Counsel in 1991. Previously, he served as Senior Vice President
and General Counsel from 1983.
Thomas E. Brother was promoted to Senior Vice President, Distribution in
1991. Previously he served as Group Vice President, Distribution from 1989.
Richard L. King was promoted to Senior Vice President and Regional Manager
in November 1994. Previously he served as Group Vice President, Merchandising
from January 1994, Vice President of the Rocky Mountain Division from 1992 and
Division Manager, Rocky Mountain Division from 1991. Prior to that time he
served as Director of Operations, Texas Division from 1990 and District Sales
Manager, Texas Division from 1987.
A. Craig Olson was promoted to Senior Vice President, Finance and Chief
Financial Officer on February 1, 1991. Previously, he served as Group Vice
President, Finance from 1986.
Carl W. Pennington was promoted to Senior Vice President, Corporate
Merchandising in 1994. Previously he served as Senior Vice President and
Regional Manager from 1988.
Allen R. Rowland has held the position of Senior Vice President and Regional
Manager since 1989.
Patrick S. Steele was promoted to Senior Vice President, Information Systems
and Technology in 1993. Previously he served as Group Vice President,
Management Information Systems from 1990 and Vice President, Systems
Development from 1983.
Ronald D. Walk has held the position of Senior Vice President and Regional
Manager since 1984.
10
<PAGE> 11
Steven D. Young was promoted to Senior Vice President, Human Resources in
1993. Previously he served as Group Vice President, Human Resources from 1991
and Vice President, Personnel from 1983.
David G. Dean was promoted to Group Vice President, Procurement in 1991.
Previously, he served as Vice President, Private Label Operations from 1988.
Peggy Jo Jones was promoted to Group Vice President, Employee Development
and Communications in November 1993. Previously she served as Vice President,
Employee Development and Communications from September 1993, Vice President,
Retail Accounting from 1992, Assistant Vice President, Retail Accounting from
1990 and Director of Retail Store Automation from 1989.
Richard J. Navarro was promoted to Group Vice President and Controller in
1993. Previously he served as Vice President and Controller from 1989.
Item 11. Executive Compensation
Information concerning executive compensation is presented under the
headings "Summary Compensation Table," "Stock Option and Year-End Value Table"
and "Retirement Benefits" in the Proxy Statement. This information is
incorporated herein by this reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to security ownership of certain beneficial owners
and management is set forth under the heading "Voting Securities and Principal
Holders Thereof" in the Proxy Statement. This information is incorporated
herein by this reference thereto.
Item 13. Certain Relationships and Related Transactions
Information concerning related transactions is presented under the heading
"Certain Transactions" in the Proxy Statement. This information is
incorporated herein by this reference thereto.
11
<PAGE> 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1 Financial Statements:
The Independent Auditors' Report, together with the Consolidated
Financial Statements and the related notes thereto, are listed
below and are incorporated herein by this reference thereto from
pages 20 to 39 of the Company's Annual Report to Stockholders for
the year ended February 2, 1995:
Consolidated Earnings -- years ended February 2, 1995;
February 3, 1994; January 28, 1993.
Consolidated Balance Sheets -- February 2, 1995;
February 3, 1994; January 28, 1993.
Consolidated Cash Flows -- years ended February 2, 1995;
February 3, 1994; January 28, 1993.
Consolidated Stockholders' Equity -- years ended
February 2, 1995; February 3, 1994; January 28, 1993.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
Quarterly Financial Data:
Quarterly Financial Data for the years ended February 2, 1995
and February 3, 1994 is set forth on page 41 of the Annual Report
to Stockholders for the year ended February 2, 1995, and is
incorporated herein by this reference thereto.
(a)2 Schedules:
All schedules are omitted because they are not required or
because the required information is included in the consolidated
financial statements or notes thereto.
(a)3 Exhibits:
A list of the exhibits required to be filed as part of this
report is set forth in the Index to Exhibits on page 16 hereof.
(b) Reports on Form 8-K:
There were no reports on Form 8-K during the quarter ended
February 2, 1995.
12
<PAGE> 13
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
Company hereby undertakes as follows, which undertaking shall be incorporated
by reference into Company's Registration Statements on Form S-8 Nos. 2-53959,
2-80776, 33-2139, 33-7901, 33-15062 and 33-43635.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the Act) may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
13
<PAGE> 14
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
numbered 2-53959, 2-80776, 33-2139, 33-7901, 33-15062, and 33-43635 on Form
S-8 and Registration Statements numbered 33-46436 and 33-49329 on Form S-3 of
Albertson's, Inc. and subsidiaries of our reports dated March 22, 1995,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
Albertson's, Inc. and subsidiaries for the year ended February 2, 1995.
Deloitte & Touche LLP
Boise, Idaho
April 7, 1995
14
<PAGE> 15
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Albertson's, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ALBERTSON'S, INC.
By GARY G. MICHAEL
---------------------------
Gary G. Michael
(Chairman of the Board and
Chief Executive Officer)
Date: April 7, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of April 7, 1995.
<TABLE>
<S> <C>
WARREN E. McCAIN GARY G. MICHAEL
- --------------------------------- ---------------------------------
Warren E. McCain Gary G. Michael
(Chairman of the Executive (Chairman of the Board and
Committee of the Board and Chief Executive Officer and
Director) Director)
JOHN B. CARLEY A. CRAIG OLSON
- --------------------------------- ---------------------------------
John B. Carley A. Craig Olson
(President and Chief Operating (Senior Vice President, Finance
Officer and Director) and Chief Financial Officer)
RICHARD J. NAVARRO KATHRYN ALBERTSON
- --------------------------------- ---------------------------------
Richard J. Navarro Kathryn Albertson
(Group Vice President and (Director)
Controller)
(Chief Accounting Officer) CECIL D. ANDRUS
--------------------------------
A. GARY AMES Cecil D. Andrus
- --------------------------------- (Director)
A. Gary Ames
(Director) JOHN B. FERY
--------------------------------
PAUL I. CORDDRY John B. Fery
- --------------------------------- (Director)
Paul I. Corddry
(Director) CHARLES D. LEIN
---------------------------------
CLARK A. JOHNSON Charles D. Lein
- --------------------------------- (Director)
Clark A. Johnson
(Director) J. B. SCOTT
---------------------------------
BEATRIZ RIVERA J. B. Scott
- --------------------------------- (Director)
Beatriz Rivera
(Director) STEVEN D. SYMMS
---------------------------------
WILL M. STOREY Steven D. Symms
- --------------------------------- (Director)
Will M. Storey
(Director)
</TABLE>
15
<PAGE> 16
Index to Exhibits
Filed with the Annual Report
on Form 10-K for the
Year Ended February 2, 1995
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
3.1 Restated Certificate of Incorporation(1)
3.2 By-Laws dated September 1, 1993(2)
4.1 Stockholder Rights Plan Agreement(3)
4.1.1 First Amendment to Stockholder Rights Plan Agreement (dated
August 31, 1987)(4)
4.1.2 Second Amendment to Stockholder Rights Plan Agreement (dated
November 28, 1988)(5)
4.1.3 Third Amendment to Stockholder Rights Plan Agreement (dated
September 6, 1989)(6)
4.1.4 Fourth Amendment to Stockholder Rights Plan Agreement (dated
September 6, 1994)(7)
4.2 Indenture, dated as of May 1, 1992, between Albertson's, Inc.,
and Morgan Guaranty Trust Company of New York as Trustee(8)
9 Inapplicable
10.2 Kathryn Albertson Stock Agreement(9)*
10.5 Form of Beneficiary Agreement for Key Executive Life Insurance(10)*
10.6 Executive Deferred Compensation Plan (amended and restated
February 1, 1989)(11)*
10.6.1 Amendment to Executive Deferred Compensation Plan (dated
December 4, 1989)(12)*
10.7 1975 Employees' Stock Option Plan (amended September 6, 1983)(13)*
10.8 Form of 1975 Nonstatutory Stock Option Agreement(9)*
10.9 Description of Bonus Incentive Plans (amended December 3,
1984)(14)*
10.10 Agreement Among Albertson's, Inc., Theo Albrecht Stiftung and
Theo Albrecht dated as of February 15, 1980(9)
10.10.1 Letter Amendment of October 13, 1982 regarding Exhibit 10.10(15)
10.10.2 First Amendment dated April 11, 1984 to Agreement among
Albertson's, Inc., Theo Albrecht Stiftung and Theo Albrecht(16)
10.10.3 Second Amendment dated September 25, 1989 to Agreement among
Albertson's, Inc., Markus Stiftung and Theo Albrecht(12)
10.10.4 Third Amendment dated December 5, 1994 to Agreement among
Albertson's, Inc., Markus Stiftung and Theo Albrecht
10.11 1982 Incentive Stock Option Plan (amended March 4, 1991)(17)*
10.12 Form of 1982 Incentive Stock Option Agreement (amended
November 30, 1987)(4)*
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
10.12.1 Form of 1982 Incentive Stock Option Agreement (used in connection
with certain options granted pursuant to the 1982 Incentive
Stock Option Plan on or after September 5, 1989)(6)*
10.13 Executive Pension Makeup Plan (amended and restated February 1,
1989)(11)*
10.13.1 First Amendment to Executive Pension Makeup Plan (dated June 8,
1989)(18)*
10.13.2 Second Amendment to Executive Pension Makeup Plan (dated January 12,
1990)(19)*
10.13.3 Third Amendment to Executive Pension Makeup Plan (dated January 31,
1990)(20)*
10.13.4 Fourth Amendment to Executive Pension Makeup Plan (effective
January 1, 1995)*
10.14 Credit Agreement (dated October 5, 1994)(21)
10.15 Senior Executive Deferred Compensation Plan (amended and
restated February 1, 1989)(11)*
10.15.1 Amendment to Senior Executive Deferred Compensation Plan (dated
December 4, 1989)(12)*
10.16 1986 Nonqualified Stock Option Plan (amended March 4, 1991)(17)*
10.17 Form of 1986 Nonqualified Stock Option Plan Stock Option Agreement
(amended November 30, 1987)(4)
10.18 Executive Pension Makeup Trust (dated February 1, 1989)(11)*
10.19 Executive Deferred Compensation Trust (dated February 1, 1989)(11)*
10.20 1990 Deferred Compensation Plan(17)*
10.20.1 Amendment to 1990 Deferred Compensation Plan (dated April 12,
1994)(7)*
10.21 Non-Employee Directors' Deferred Compensation Plan(17)*
10.22 1990 Deferred Compensation Trust (dated November 20, 1990)(17)*
10.23 Letter Agreement with Warren E. McCain (dated December 3, 1990)(17)*
11 Inapplicable
12 Inapplicable
13 Exhibit 13 consists of pages 17 to 41 and the inside back cover of
Albertson's, Inc. 1994 Annual Report to Stockholders which are
numbered as pages 1 to 26 of Exhibit 13. Such report, except to the
extent incorporated hereby by reference, has been sent to and
furnished for the information of the Securities and Exchange
Commission only and is not to be deemed filed as part of this Annual
Report on Form 10-K. The references to the pages incorporated by
reference are to the printed Annual Report. The references to the
pages of Exhibit 13 are as follows: Item 5--page 26; Item 6--page
24; Item 7--pages 1 through 3; and Item 8--pages 4 through 23 and
page 25.
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
14 Inapplicable
15 Inapplicable
16 Inapplicable
17 Inapplicable
18 Inapplicable
19 Inapplicable
20 Inapplicable
21 Inapplicable
22 Inapplicable
23 Inapplicable
24 Inapplicable
25 Inapplicable
26 Inapplicable
27 Financial Data Schedule
28 Inapplicable
</TABLE>
* Identifies management contracts or compensatory plans or
arrangements required to be filed as an exhibit hereto.
(1) Exhibit 3.1 is incorporated herein by reference to Exhibit 3.1 of the
Form 10-Q for the quarter ended May 2, 1991.
(2) Exhibit 3.2 is incorporated herein by reference to Exhibit 3.2 of the
Form 10-K for the year ended February 3, 1994.
(3) Exhibit 4.1 is incorporated herein by reference to Exhibit 1 of
Albertson's, Inc. Form 8-A Registration Statement filed with the
Commission on March 3, 1987.
(4) Exhibits 4.1.1, 10.12 and 10.17 are incorporated herein by reference to
Exhibits 4.1.1, 10.12 and 10.17, respectively, of the Form 10-Q for the
quarter ended October 29, 1987.
(5) Exhibit 4.1.2 is incorporated herein by reference to Exhibit 4.1.2 of
the Form 10-Q for the quarter ended October 27, 1988.
(6) Exhibits 4.1.3 and 10.12.1 are incorporated herein by reference to
Exhibits 4.1.3 and 10.12.1, respectively, of the Form 10-Q for the
quarter ended August 3, 1989.
(7) Exhibits 4.1.4 and 10.20.1 are incorporated herein by reference to
Exhibits 4.1.4 and 10.20.1, respectively of the Form 10-Q for the
quarter ended August 4, 1994.
18
<PAGE> 19
(8) Exhibit 4.2 is incorporated herein by reference to Exhibit 4.1 of
Registration Statement 33-49329. In reliance upon Item
601(b)(4)(iii)(A) of Regulation S-K, various other instruments defining
the rights of holders of long-term debt of the Registrant and its
subsidiaries are not being filed herewith, because the total amount of
securities authorized under each such instrument does not exceed 10% of
the total assets of the Registrant and its subsidiaries on a
consolidated basis. The Registrant hereby agrees to furnish a copy of
any such instrument to the Commission upon request.
(9) Exhibits 10.2, 10.8 and 10.10 are incorporated herein by reference
to Exhibits 10.2, 10.8 and 10.10, respectively, of the Form 10-K for
the year ended January 29, 1981.
(10) Exhibit 10.5 is incorporated herein by reference to Exhibit 10.5.1 of
the Form 10-K for the year ended January 30, 1986.
(11) Exhibits 10.6, 10.13, 10.15, 10.18 and 10.19 are incorporated herein
by reference to Exhibits 10.6, 10.13, 10.15, 10.18 and 10.19,
respectively, of the Form 10-K for the year ended February 2, 1989.
(12) Exhibits 10.6.1, 10.10.3 and 10.15.1 are incorporated herein by
reference to Exhibits 10.6.1, 10.10.3 and 10.15.1, respectively, of
the Form 10-Q for the quarter ended November 2, 1989.
(13) Exhibit 10.7 is incorporated herein by reference to Exhibit 10.7 of the
Form 10-K for the year ended February 2, 1984. Exhibit 10.7 expired by
its terms April 6, 1985. Notwithstanding such expiration, certain
agreements for options granted under this option plan remained
outstanding during the fiscal year.
(14) Exhibit 10.9 is incorporated herein by reference to Exhibit 10.9 of
the Form 10-K for the year ended January 31, 1985.
(15) Exhibit 10.10.1 is incorporated herein by reference to
Exhibit 10.10.1 of the Form 10-K for the year ended February 3, 1983.
(16) Exhibit 10.10.2 is incorporated herein by reference to
Exhibit 10.10.2 of the Company's Form 10-Q for the quarter ended
May 3, 1984.
(17) Exhibits 10.11, 10.16, 10.20, 10.21, 10.22 and 10.23 are incorporated
herein by reference to Exhibits 10.11, 10.16, 10.20, 10.21, 10.22 and
10.23, respectively, of the Form 10-K for the year ended January 31,
1991. Exhibit 10.11 expired by its terms February 29, 1992.
Notwithstanding such expiration, certain agreements for the options
granted under this option plan remain outstanding.
(18) Exhibit 10.13.1 is incorporated herein by reference to
Exhibit 10.13.1 of the Company's Form 10-Q for the quarter ended
May 4, 1989.
(19) Exhibit 10.13.2 is incorporated herein by reference to Exhibit 10.13.2
of the Company's Form 10-K for the year ended February 1, 1990.
(20) Exhibit 10.13.3 is incorporated herein by reference to Exhibit 10.13.3
of the Company's Form 10-Q for the quarter ended August 2, 1990.
(21) Exhibit 10.14 is incorporated herein by reference to Exhibit 10.14
of the Company's Form 10-Q for the quarter ended November 3, 1994.
19
<PAGE> 1
EXHIBIT 10.10.4
THIRD AMENDMENT
DATED AS OF DECEMBER 5, 1994
TO AGREEMENT AMONG ALBERTSON'S, INC.
MARKUS-STIFTUNG
and
THEO ALBRECHT
RECITALS:
A. Albertson's, Inc., a corporation organized under the laws of
Delaware ("Company"), Theo Albrecht Stiftung, a Familienstiftung organized
under the laws of the Federal Republic of Germany (the name of which was
changed to Markus-Stiftung on April 22, 1988 and is hereinafter referred to as
"Markus"), and Theo Albrecht, the Chairman of the Board of Directors of Markus
("Albrecht") entered into that certain Agreement dated as of February 15, 1980,
as amended as set forth in paragraph B below ("Agreement").
B. The Agreement has been amended pursuant to that certain First
Amendment dated as of April 11, 1984 ("First Amendment") and pursuant to that
certain Second Amendment dated as of September 25, 1989 ("Second Amendment").
Among other things, the First Amendment authorized Markus to acquire up to 12%
of the common stock of the Company. Among other things, the Second Amendment
extended the term of the Agreement to and including February 14, 1995.
<PAGE> 2
C. Markus presently is the beneficial owner of 29,152,800 shares
of the common stock of the Company, par value $1.00 per share (the "Common
Stock"), representing 11.5% of the Common Stock outstanding at the date of this
Third Amendment. The Company and Markus believe that it is in their mutual
best interests (a) that Markus be authorized to acquire additional shares of
Common Stock, provided, however, that Markus and Albrecht and their affiliates
shall not be authorized to acquire more than 14% of the outstanding voting
securities of the Company and (b) that the term of the Agreement be extended to
and including February 14, 2000.
AGREEMENTS:
NOW, THEREFORE, in consideration of the provisions and mutual
covenants and agreements set forth herein, the Company, Markus and Albrecht
hereby amend the Agreement as follows:
1. Paragraph 1 of the Agreement, as set forth in the First
Amendment, is hereby amended at the third line of such paragraph by deleting
the term "9.9%" and substituting the term "11.5%" therefor.
2. Paragraph 2 of the Agreement is hereby amended at the seventh
and thirteenth lines on page 4 of the Agreement by deleting the term "12%"
and substituting the term "14%" therefor.
3. (a) Paragraph 5 of the Agreement is hereby amended at the
second line of such paragraph by deleting the term "fifteen" and substituting
the term "twenty" therefor and at the third line of such paragraph by deleting
the term "1995" and substituting the term "2000" therefor, and all references
in the Agreement to the term of the Agreement (as defined in paragraph 5) shall
be deemed to refer to Paragraph 5 as hereby amended.
2
<PAGE> 3
(b) Paragraph 5 of the Agreement is hereby amended at the
first and second lines on page 12 of the Agreement by deleting the clause "J.A.
Albertson or his heirs" and substituting the clause " Kathryn Albertson or her
heirs" therefor.
(c) Paragraph 5 of the Agreement is hereby amended at the
second, fifth and tenth lines on page 12 of the Agreement by deleting the term
"12%" and substituting the term "14%" therefor.
4. Paragraph 6(a)(i) of the Agreement is hereby deleted and the
following Paragraph 6(a)(i) substituted therefor:
"(i) to the placement of the following legend on each
certificate representing Voting Securities owned by Markus or
Albrecht or any affiliate:
'The shares evidenced by this certificate are until February 14,
2000, subject to, and may be sold, transferred or otherwise
disposed of only upon compliance with, the terms and the provisions
of that certain Agreement dated February 15, 1980, between
Albertson's, Inc., Markus-Stiftung and Theo Albrecht, as amended,
copies of which are on file and may be examined at the office of
the Corporate Secretary of Albertson's, Inc. After February 14,
2000, these shares may be sold, transferred or otherwise disposed
of without any compliance with said Agreement, as amended.'"
5. Paragraph 6(c) of the Agreement is hereby amended at the first
line of such paragraph by deleting the term "1995" and substituting the term
"2000" therefor.
6. Paragraph 9(f) of the Agreement is hereby amended to add the
following sentence at the end of such pargraph:
All provisions of this Agreement applicable to Voting
Securities held by Markus or its affiliates shall apply to all
Voting Securities acquired by Markus or its affiliates,
whether or not acquired pursuant to, or in conformity with,
any amendment hereto.
7. Paragraph 9(g) of the Agreement is hereby amended at the
thirteenth, fourteenth and fifteenth lines of such paragraph by deleting the
name and title "Warren E. McCain, Chief Executive Officer and President" and
substituting the name and title "Gary
3
<PAGE> 4
G. Michael, Chairman of the Board and Chief Executive Officer" therefor and at
the eighteenth line by deleting the title "Senior Vice President and General
Counsel" and substituting the title "Executive Vice President, Administration
and General Counsel" therefor so that the name and title on the seventeenth and
eighteenth lines reads "Thomas R. Saldin, Executive Vice President,
Administration and General Counsel."
8. In all other respects, the Agreement, as amended, shall remain
in full force and effect.
IN WITNESS WHEREOF, Albertson's, Inc., Markus-Stiftung and Theo
Albrecht have caused this Third Amendment to be duly executed as of the day and
year first above written.
ALBERTSON'S, INC.
BY: GARY G. MICHAEL
-------------------------
Chairman of the Board
MARKUS-STIFTUNG
BY: THEO ALBRECHT
-----------------------
Chairman of the Board
THEO ALBRECHT
------------------------
THEO ALBRECHT
4
<PAGE> 1
EXHIBIT 10.13.4
FOURTH AMENDMENT TO
ALBERTSON'S, INC.
EXECUTIVE PENSION MAKEUP PLAN
This Amendment is made by Albertson's, Inc., a Delaware corporation
(the "Corporation").
RECITALS:
A. The Corporation established effective June 1, 1988, the Albertson's,
Inc. Executive Pension Makeup Plan for the purpose of providing
supplementary retirement benefits to a select group of management or
highly compensated employees, and amended and restated such plan,
effective February 1, 1989, and subsequently amended the plan (as
amended and restated, the "Plan").
B. The Corporation, under Article V of the Plan, reserved the right to
amend the Plan.
C. Pursuant to resolutions adopted by the Board of Directors of the
Corporation on August 29, 1988 and May 26, 1989, the Administrative
Committee of the Grantor Trust Committee (the "Committee") was granted
authority to amend the Plan.
D. The Committee has determined that it is advisable to amend the Plan in
the manner hereinafter set forth.
AMENDMENTS:
NOW, THEREFORE, the following amendments to the Plan are hereby
adopted, effective January 1, 1995:
1. Article I is expanded to include the following definitions:
"Normal Retirement Date" shall have the same meaning as set
forth in the Salaried Pension Plan.
"Retirement Benefit" shall mean a Participant's benefit as
determined pursuant to Section 3.02.
2. Section 3.01 is renamed "AMOUNT OF ACCRUED BENEFIT."
<PAGE> 2
3. A new Section 3.02 shall be added as follows:
3.02 AMOUNT OF RETIREMENT BENEFIT. A Participant's
Retirement Benefit shall be a monthly benefit equal to the
Participant's Accrued Benefit adjusted in the same manner as
under the Salaried Pension Plan for benefits commencing at
a date other than the Participant's Normal Retirement Date.
4. Sections 3.02, 3.03 and 3.04 are renumbered as Sections 3.03,
3.04 and 3.05, respectively.
5. Section 4.02 is amended to read, in its entirety, as follows:
4.02 FORM OF BENEFIT PAYMENTS. Benefit payments shall be
paid in the form of a period-certain and life annuity which is
the payment of a reduced benefit to the Participant payable
until death, and if the Participant's death occurs within a
period 10 years after benefit payments commence, payments of
such reduced benefit shall be continued in the same amount to
the Participant's Beneficiary (i.e., the Participant's
Beneficiary or Beneficiaries designated under the Salaried
Pension Plan) for the balance of the 10-year period. Such
benefit shall be the actuarial equivalent of the Participant's
Retirement Benefit. Notwithstanding the foregoing, if the
lump sum amount which is the actuarial equivalent of the
Participant's Retirement Benefit is $3,500 or less, such
amount shall immediately be distributed in a single lump sum
payment. The actuarial equivalent of the Participant's
Retirement Benefit shall be determined using the actuarial
assumptions and equivalents provided under the Salaried
Pension Plan.
IN WITNESS WHEREOF, the Employer has caused this Fourth Amendment to
be executed by its duly authorized officers this 27th day of January, 1995
to be effective as of January 1, 1995.
ALBERTSON'S, INC.
a Delaware corporation
BY: THOMAS R. SALDIN
----------------------------------
Thomas R. Saldin
Executive Vice President,
Administration and General Counsel
2
<PAGE> 1
EXHIBIT 13
Albertson's, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company has reported increased sales and earnings for 25
consecutive years. Sales for 1994 were $11.9 billion compared to $11.3 billion
in 1993 (a 53-week year) and $10.2 billion in 1992. Sales for 1994 increased
7.4% when compared on a 52-week basis to 1993. Increases in sales are
attributable to a number of factors, including identical store sales increases,
the continued expansion of net square footage, inflation and the purchase of 74
Jewel Osco stores on April 13, 1992. Identical store sales, stores that have
been in operation for two full fiscal years, increased 2.3% (on a comparable
52-week basis) in 1994, 2.8% (on a comparable 53-week basis) in 1993 and 1.8%
in 1992. Identical store sales continued to increase through higher average
ticket sales per customer and increased customer counts. Management estimates
that inflation accounted for approximately 0.7% of the 1994 identical store
sales increase, compared to 0.6% in 1993 and 1.7% in 1992. During 1994, the
Company opened 55 stores (5 of which were acquired), remodeled 46 stores and
closed 11 stores for a net square footage increase of 2.4 million square feet.
Net square footage increased 7.7% in 1994, 4.1% in 1993 and 23.0% in 1992.
The following table sets forth certain income statement components
expressed as a percent to sales and the year-to-year percentage changes in the
amounts of such components:
<TABLE>
<CAPTION>
Percent to Sales Percentage Change
-------------------------------- --------------------------------
1994 1993 1992
1994 1993 1992 vs. 1993 vs. 1992 vs. 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 100.00% 100.00% 100.00% 5.4% 10.9% 17.2%
Gross profit 25.32 24.74 24.11 7.9 13.8 17.8
Selling, general and
administrative
expenses 19.14 19.16 19.41 5.3 9.4 18.5
Operating profit 6.17 5.58 4.70 16.6 31.8 15.4
Net interest expense 0.52 0.45 0.42 21.9 18.2 86.6
Nonrecurring charge 0.26
Earnings before income taxes
and cumulative effects
of accounting changes 5.71 4.89 4.36 22.9 24.5 9.2
Net earnings 3.37 3.01 2.65 17.9 26.2 4.4
</TABLE>
Gross profit, as a percent to sales, increased due primarily to the
expansion and increased utilization of Company-owned distribution facilities.
During 1994, the Company's distribution system provided 77% of all products
purchased by retail stores, compared to 70% in 1993 and 66% in 1992.
Utilization of the Company's distribution system has enabled the Company to
improve its control over product costs and product distribution. The pre-tax
LIFO adjustment, as a percent to sales, reduced gross margin by 0.08% in 1994,
0.06% in 1993 and 0.12% in 1992.
The 1992 increase in selling, general and administrative (SG&A)
expenses was due primarily to one-time costs associated with the Jewel Osco
Acquisition. The Company continues to emphasize cost containment programs as
well as increased productivity in an effort to continue to reduce SG&A expenses
as a percent to sales.
Net interest expense for 1993 included a reduction of $9.7 million due
to the successful resolution of a tax issue for which interest expense had
previously been accrued. Excluding this adjustment, net interest expense for
1993, as a percent to sales, would have increased to 0.54% due to borrowings
associated with the Company's purchase of its common stock from the estate of
J. A. Albertson on March 10, 1993. The 1992 increase in net interest expense
resulted from new borrowings associated with the Jewel Osco Acquisition.
SEVENTEEN
<PAGE> 2
Albertson's, Inc.
Net earnings for 1994 were reduced by $17.0 million (0.14% to sales)
for the cumulative effect of the adoption of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," which
was recognized in the first quarter. Net earnings for 1993 included a
nonrecurring charge to cover the settlement of a lawsuit and a decrease in
interest expense due primarily to the successful resolution of a tax issue,
both of which were recognized in the third quarter of 1993. Net earnings for
1992 were reduced by certain one-time costs primarily associated with the Jewel
Osco Acquisition and two accounting changes, all of which were recognized in
the first quarter of 1992. The following table shows comparisons for 1994, 1993
and 1992 of certain income statement components and the percent to sales,
excluding these adjustments (dollars in millions):
<TABLE>
<CAPTION>
1994 1993 1992
----------------- ----------------- ------------------
DOLLARS PERCENT Dollars Percent Dollars Percent
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross profit $3,011.4 25.32% $2,791.2 24.74% $2,460.6 24.33%
Selling, general and
administrative expenses 2,277.1 19.14 2,161.6 19.16 1,941.1 19.19
Operating profit 734.2 6.17 629.6 5.58 519.5 5.14
Net earnings 417.4 3.51 352.1 3.12 307.1 3.04
</TABLE>
Liquidity and Capital Resources
The Company's operating results continue to enhance its financial
position and ability to continue its planned expansion program. Cash provided
by operating activities during 1994 was $608 million compared to $585 million
in 1993 and $498 million in 1992. These amounts have enabled the Company to
fund its capital expansion program (aside from the 1992 Jewel Osco Acquisition)
and pay dividends. During 1994, the Company spent $473 million on capital
expenditures, $83 million to reduce long-term debt and $107 million for the
payment of dividends (which represents 26.6% of 1994 net earnings). The Company
also utilizes its commercial paper program to supplement cash requirements
from seasonal fluctuations in working capital resulting from operations and the
Company's capital expenditure program. Accordingly, commercial paper borrowings
will fluctuate between the Company's quarterly reporting periods. The Company
had $109.7 million of commercial paper borrowings outstanding at February 2,
1995, compared to $79.9 million at February 3, 1994, and $110.0 million at
January 28, 1993. As of February 2, 1995, the Company had available lines of
credit of $435 million, of which $400 million was reserved as alternative
funding for the Company's commercial paper program.
On March 10, 1993, pursuant to a 1979 agreement, the Company purchased
21,976,320 shares of its common stock from the estate of J. A. Albertson, the
Company's founder, at a cost of $518 million or $23.55 per share. This purchase
was financed through the reissuance of 10,400,000 shares of treasury stock at
$26.25 per share, netting $265 million, and the issuance of $252 million in
medium-term notes. The effect of these transactions was to retire the remaining
11,576,320 treasury shares at a net cost to the Company of $21.85 per share.
Since 1987, the Board of Directors has continuously adopted or renewed
plans under which the Company is authorized, but not required, to purchase
shares of its common stock on the open market. The current plan was adopted by
the Board on March 6, 1995, and authorizes the Company to purchase up to five
million shares through March 31, 1996. No shares were purchased under these
plans in 1994, 1993 or 1992.
EIGHTEEN
<PAGE> 3
Albertson's, Inc.
The following leverage ratios demonstrate the Company's levels of
long-term financing as of the indicated year end:
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt (including capitalized lease obligations)
to equity 30.4% 47.9% 36.6%
Long-term debt (including capitalized lease obligations)
to total assets 14.1% 20.2% 17.3%
</TABLE>
During 1994, the Company opened 53 combination food-drug stores,
1 warehouse store and 1 conventional store. The average size of these stores,
49,800 square feet, increased the Company's average store size to 46,900 square
feet. At February 2, 1995, 92% of the Company's square footage consisted of
stores over 35,000 square feet. Square footage has also increased because of
the Company's remodel program. In 1994, 13 of the 46 remodeled stores were
expanded in size. The Company continues to retain ownership of real estate when
possible.
During the past three years, the Company has invested $220 million
(excluding inventory) in its distribution operations and has added 2.5 million
square feet of new or expanded facilities. A new 687,000 square foot full-line
distribution center in Tolleson, Arizona, located in the Phoenix metropolitan
area, became fully operational in August 1993. The Company also purchased an
existing 818,000 square foot warehouse in Plant City, Florida in February 1993.
This center was remodeled and expanded to approximately 954,000 square feet to
add frozen and perishable storage areas. It began limited operations in
December 1993 and became fully operational in March 1994. The Company services
all of its retail stores from Company-owned distribution centers.
Capital expenditures for 1995 (excluding amounts anticipated to be
financed by operating leases of approximately $30 million) are expected to be
approximately $560 million. New stores and remodels will continue to be the
most significant portion of planned capital expenditures. The Company is
committed to keeping its stores up to date. In the last three years, the
Company has opened and remodeled 337 stores representing 16.3 million square
feet. In 1995, the Company plans to begin construction on a full-line
distribution center in South Texas. The following is a summary of capital
expenditures excluding operating leases but including the Jewel Osco
Acquisition in 1992, capital leases and assets acquired with related debt (in
thousands):
<TABLE>
<CAPTION>
1995
(PROJECTED) 1994 1993 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New and acquired stores $320,000 $320,479 $246,052 $466,246
Remodels 110,000 86,381 82,409 74,914
Retail replacement equipment and
technological upgrades 45,000 36,464 20,804 10,793
Distribution facilities and equipment 70,000 38,490 100,936 81,024
Other 15,000 17,119 5,963 9,880
----------------------------------------------
$560,000 $498,933 $456,164 $642,857
==============================================
</TABLE>
The estimated fair market value of new and acquired stores opened in
1994 and financed by operating leases was approximately $18 million.
NINETEEN
<PAGE> 4
Albertson's, Inc.
CONSOLIDATED EARNINGS
<TABLE>
<CAPTION>
52 WEEKS 53 Weeks 52 Weeks
FEBRUARY 2, February 3, January 28,
(In thousands except per share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $11,894,621 $11,283,678 $10,173,676
Cost of sales 8,883,265 8,492,524 7,720,824
-----------------------------------------------
Gross profit 3,011,356 2,791,154 2,452,852
Selling, general and administrative expenses 2,277,119 2,161,561 1,975,079
-----------------------------------------------
Operating profit 734,237 629,593 477,773
Other (expenses) income:
Interest, net (62,141) (50,984) (43,124)
Other, net 6,556 3,506 9,072
Nonrecurring charge (29,900)
-----------------------------------------------
Earnings before income taxes and cumulative effects
of accounting changes 678,652 552,215 443,721
Income taxes 261,281 212,534 167,646
-----------------------------------------------
Earnings before cumulative effects of accounting changes 417,371 339,681 276,075
Cumulative effects of accounting changes:
Postemployment benefits (17,006)
Postretirement health care benefits (4,093)
Accounting for income taxes (2,765)
-----------------------------------------------
NET EARNINGS $ 400,365 $ 339,681 $ 269,217
===============================================
Earnings per share before cumulative effects
of accounting changes $ 1.65 $ 1.34 $ 1.04
Cumulative effects of accounting changes:
Postemployment benefits (.07)
Postretirement health care benefits (.01)
Accounting for income taxes (.01)
-----------------------------------------------
EARNINGS PER SHARE $ 1.58 $ 1.34 $ 1.02
===============================================
Average number of common shares outstanding 253,633 254,227 264,418
</TABLE>
See Notes to Consolidated Financial Statements.
TWENTY
<PAGE> 5
Albertson's, Inc.
CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
52 WEEKS 53 Weeks 52 Weeks
FEBRUARY 2, February 3, January 28,
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 400,365 $ 339,681 $ 269,217
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 226,467 196,427 171,724
Net deferred income taxes (18,956) (12,016) 8,462
Cumulative effects of accounting changes 17,006 6,858
Changes in operating assets and liabilities,
net of acquisition:
Receivables and prepaid expenses (499) (24,194) (36,114)
Inventories (76,842) (41,633) (72,955)
Accounts payable (24,825) 84,601 104,614
Other current liabilities (86) 23,836 38,570
Self-insurance 31,125 10,192 4,788
Unearned income 51,318 (609) (7,859)
Other long-term liabilities 3,059 8,230 10,671
--------------------------------------
Net cash provided by operating activities 608,132 584,515 497,976
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired (428,860)
Capital expenditures (473,247) (435,526) (331,160)
Proceeds from disposals of land,
buildings and equipment 44,752 20,874 18,053
Increase in other assets (31,971) (3,719) (14,808)
--------------------------------------
Net cash used in investing activities (460,466) (418,371) (756,775)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net line of credit activity (10,000) 5,000 (25,000)
Proceeds from long-term borrowings 252,075 443,000
Payments on long-term borrowings (83,013) (32,158) (43,497)
Net commercial paper activity 29,828 (30,090) (33,000)
Proceeds from stock options exercised 9,782 4,484 4,390
Purchase of treasury shares (517,526)
Net proceeds from issuance of treasury shares 264,527
Cash dividends paid (106,502) (89,534) (81,957)
--------------------------------------
Net cash (used in) provided by
financing activities (159,905) (143,222) 263,936
--------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (12,239) 22,922 5,137
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 62,463 39,541 34,404
--------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 50,224 $ 62,463 $ 39,541
======================================
</TABLE>
See Notes to Consolidated Financial Statements.
TWENTY-ONE
<PAGE> 6
Albertson's, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 50,224 $ 62,463 $ 39,541
Accounts and notes receivable 109,324 114,493 90,945
Inventories 948,561 871,719 830,086
Prepaid expenses 19,257 13,589 12,943
Deferred income taxes 62,223 59,967 39,948
-------------------------------------
TOTAL CURRENT ASSETS 1,189,589 1,122,231 1,013,463
OTHER ASSETS 122,781 90,810 87,091
LAND, BUILDINGS AND EQUIPMENT:
Land 527,125 467,392 415,911
Buildings 1,242,813 1,097,681 930,883
Fixtures and equipment 1,258,749 1,130,735 1,001,627
Leasehold improvements 287,544 257,566 231,533
Capitalized leases 180,026 155,798 147,316
-------------------------------------
3,496,257 3,109,172 2,727,270
Less accumulated depreciation and amortization 1,186,898 1,027,318 882,251
-------------------------------------
2,309,359 2,081,854 1,845,019
-------------------------------------
$3,621,729 $3,294,895 $2,945,573
=====================================
</TABLE>
See Notes to Consolidated Financial Statements.
TWENTY-TWO
<PAGE> 7
Albertson's, Inc.
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
(Dollars in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Accounts payable $ 575,551 $ 600,376 $ 515,775
Notes payable 10,000 5,000
Salaries and related liabilities 114,906 101,443 95,820
Taxes other than income taxes 38,212 38,095 41,522
Income taxes 37,913 48,622 29,592
Self-insurance 63,905 58,436 51,870
Unearned income 22,092 19,927 15,567
Other 34,810 30,277 26,033
Current maturities of long-term debt 201,146 76,692 25,757
Current capitalized lease obligations 6,904 6,194 6,044
---------------------------------------
TOTAL CURRENT LIABILITIES 1,095,439 990,062 812,980
LONG-TERM DEBT 382,775 554,092 404,476
CAPITALIZED LEASE OBLIGATIONS 129,573 110,919 103,764
OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS:
Deferred compensation 36,396 31,684 28,016
Deferred income taxes 2,017 28,766 20,763
Deferred rents payable 69,381 72,251 69,864
Self-insurance 109,513 83,857 80,231
Unearned income 59,978 10,825 15,794
Other 48,764 23,060 21,257
---------------------------------------
326,049 250,443 235,925
STOCKHOLDERS' EQUITY:
Preferred stock - $1.00 par value;
authorized - 10,000,000 shares;
issued - none
Common stock - $1.00 par value;
authorized - 600,000,000 shares;
issued - 253,984,381 shares,
253,406,983 shares and 132,329,428 shares,
respectively 253,984 253,407 132,330
Capital in excess of par value 11,322 2,117 4,909
Retained earnings 1,422,587 1,133,855 1,251,189
---------------------------------------
1,687,893 1,389,379 1,388,428
---------------------------------------
$3,621,729 $3,294,895 $2,945,573
=======================================
</TABLE>
See Notes to Consolidated Financial Statements.
TWENTY-THREE
<PAGE> 8
Albertson's, Inc.
CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Capital in
Stock $1.00 Excess of Retained Treasury
(In thousands except per share data) Par Value Par Value Earnings Stock Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 30, 1992 $132,131 $ 718 $1,066,603 $1,199,452
Exercise of stock options 199 1,475 1,674
Tax benefits related to stock options 2,716 2,716
Cash dividends, $.32 per share (84,631) (84,631)
Net earnings 269,217 269,217
-----------------------------------------------------------------
BALANCE AT JANUARY 28, 1993 132,330 4,909 1,251,189 1,388,428
Exercise of stock options 245 1,700 1,945
Tax benefits related to stock options 2,538 2,538
Purchase treasury shares $(517,526) (517,526)
Issue treasury shares 19,615 244,912 264,527
Retire treasury shares (5,788) (25,010) (241,816) 272,614
Two-for-one stock split 126,620 (1,635) (124,985)
Other 953 953
Cash dividends, $.36 per share (91,167) (91,167)
Net earnings 339,681 339,681
-----------------------------------------------------------------
BALANCE AT FEBRUARY 3, 1994 253,407 2,117 1,133,855 1,389,379
Exercise of stock options 577 5,120 5,697
Tax benefits related to stock options 4,085 4,085
Cash dividends, $.44 per share (111,633) (111,633)
Net earnings 400,365 400,365
-----------------------------------------------------------------
BALANCE AT FEBRUARY 2, 1995 $253,984 $ 11,322 $1,422,587 $1,687,893
=================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
TWENTY-FOUR
<PAGE> 9
Albertson's, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
FISCAL YEAR END The Company's fiscal year ends on the Thursday nearest to
January 31 each year. Unless the context otherwise indicates, reference to a
fiscal year of the Company refers to the calendar year in which such fiscal
year commences.
CONSOLIDATION The consolidated financial statements include the results of
operations, account balances and cash flows of the Company and its wholly owned
subsidiaries. All material intercompany balances have been eliminated.
CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments
with a maturity of three months or less at the time of purchase to be cash
equivalents.
INVENTORIES The Company values inventories at the lower of cost or market. Cost
of substantially all inventories is determined on a last-in, first-out (LIFO)
basis.
CAPITALIZATION, DEPRECIATION AND AMORTIZATION Land, buildings and equipment are
recorded at cost. Depreciation is provided on the straight-line method over the
estimated useful life of the asset. Estimated useful lives are generally as
follows: buildings and improvements -- 10 to 35 years; fixtures and equipment
- -- 3 to 8 years; leasehold improvements -- 10 to 15 years; and capitalized
leases -- 25 to 30 years.
The costs of major remodeling and improvements on leased stores are
capitalized as leasehold improvements. Leasehold improvements are amortized on
the straight-line method over the shorter of the life of the applicable lease
or the useful life of the asset. Capital leases are recorded at the lower of
fair market value of the asset or the present value of future minimum lease
payments. These leases are amortized on the straight-line method over their
primary term.
Beneficial lease rights and lease liabilities are recorded on
purchased leases based on differences between contractual rents under the
respective lease agreements and prevailing market rents at the date of the
acquisition of the lease. Beneficial lease rights are amortized over the lease
term using the straight-line method. Lease liabilities are amortized over the
lease term using the interest method.
Upon disposal of fixed assets, the appropriate property accounts are
reduced by the related costs and accumulated depreciation and amortization. The
resulting gains and losses are reflected in consolidated earnings.
STORE OPENING AND CLOSING COSTS Noncapital expenditures incurred in opening new
stores or remodeling existing stores are expensed in the year in which they are
incurred. When a store is closed the remaining investment in fixed assets, net
of expected recovery value, is expensed. For properties under operating lease
agreements, the present value of any remaining liability under the lease, net
of expected sublease recovery, is also expensed.
SELF-INSURANCE The Company is primarily self-insured for property loss,
workers' compensation and general liability costs. Self-insurance liabilities
are based on claims filed and estimates for claims incurred but not reported.
These liabilities are not discounted.
STOCK OPTIONS Proceeds from the sale of newly issued stock to employees under
the Company's stock option plans are credited to common stock to the extent of
par value and the excess to capital in excess of par value. With respect to
nonqualified stock options, the difference between the option exercise price
and market value of the stock at date of grant is charged to operations over
the vesting period. Income tax benefits attributable to stock options exercised
are credited to capital in excess of par value.
INCOME TAXES The Company provides for deferred income taxes resulting from
timing differences in reporting certain income and expense items for income tax
and financial accounting purposes. The major timing differences and their net
effect are shown in the "Income Taxes" note. Investment tax credits have been
deferred and are being amortized over the remaining useful life of the related
asset.
TWENTY-FIVE
<PAGE> 10
Albertson's, Inc.
EARNINGS PER SHARE Earnings per share are computed by dividing consolidated
net earnings by the weighted average number of common shares outstanding.
Equivalent shares in the form of stock options are excluded from the
calculation since they are not materially dilutive.
STOCK SPLIT On August 30, 1993, the Board of Directors approved a two-for-
one stock split, effected in the form of a 100% stock dividend payable to
stockholders of record at the close of business on September 17, 1993, and
distributed on October 4, 1993. All references in the financial statements to
the number of shares (except outstanding shares at year end), related prices
and per share amounts have been restated to reflect the split.
Nonrecurring Charge
During the third quarter of 1993, a $29.9 million nonrecurring charge
was recorded to cover a $29.5 million settlement of a lawsuit. The
nonrecurring charge covers the full cost of the settlement including compliance
with the consent decree and plaintiffs' attorney fees, as well as all expenses
associated with its implementation.
Supplemental Cash Flow Information
Selected cash payments and noncash activities were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash payments for income taxes $285,884 $202,472 $143,045
Cash payments for interest,
net of amounts capitalized 51,103 36,311 27,819
Noncash investing and financing activities:
Liabilities assumed in connection with business acquisition 12,385
Liabilities assumed in connection with asset acquisitions 112 5,590
Capitalized lease obligations incurred 28,232 15,048 12,647
Capitalized lease obligations terminated 2,658 1,656
</TABLE>
Acquisition
On April 13, 1992, the Company purchased 74 Jewel Osco combination
food-drug stores, a general merchandise warehouse in Ponca City, Oklahoma and
related assets, including potential store locations, from American Stores
Company (the Acquisition). The Acquisition included stores located in Texas (52
stores), Oklahoma (14 stores), Florida (7 stores) and Arkansas (1 store). The
majority of the acquired stores are located in existing operating areas of the
Company, and the Company is continuing to operate most of these stores as
combination food-drug stores under the Albertson's name. The Acquisition was
accounted for using the purchase method of accounting.
The purchase price, based upon the book value of fixed assets and cost
of inventory, was approximately $442 million, including approximately $144
million for inventory. The purchase price included real estate for 41 operating
stores and the general merchandise warehouse. The remaining 33 operating stores
are subject to leases that have been assumed by the Company. The Acquisition
was ultimately financed through proceeds from commercial paper borrowings and
offerings of senior unsecured debt securities. The results of operations of the
acquired properties have been included in the consolidated financial statements
from the date of acquisition.
TWENTY-SIX
<PAGE> 11
Albertson's, Inc.
Accounts and Notes Receivable
Accounts and notes receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trade accounts receivable $108,080 $ 113,335 $ 86,239
Trade notes receivable 2,606 2,191 5,813
Allowance for doubtful accounts (1,362) (1,033) (1,107)
-------------------------------------
$109,324 $ 114,493 $ 90,945
=====================================
</TABLE>
Inventories
Approximately 96% of the Company's inventories are valued using the
last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) method had
been used, inventories would have been $200,738,000, $191,592,000 and
$185,150,000 higher at the end of 1994, 1993 and 1992, respectively. Net
earnings would have been higher by $5,625,000 ($.02 per share) in 1994,
$3,962,000 ($.02 per share) in 1993 and $7,964,000 ($.03 per share) in 1992.
The replacement cost of inventories valued at LIFO approximates FIFO cost.
Indebtedness
Long-term debt includes the following (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unsecured 6.375% notes due May 1995 $ 150,000 $150,000 $150,000
Medium-term notes, unsecured:
Due May 1993 (4.29% interest) 25,000
Due May 1994 (5.49% interest) 75,000 75,000
Due May 1995 (6.15% interest) 50,000 50,000 50,000
Due March 1996 (4.86% interest) 77,000 77,000
Due March 1998 (5.68% interest) 85,425 85,425
Due March 2000 (6.14% interest) 89,650 89,650
Commercial paper 109,738 79,910 110,000
Industrial revenue bonds 16,550 17,305 18,040
Mortgage notes 5,558 6,083 1,807
Other unsecured notes payable 411 386
--------------------------------------
583,921 630,784 430,233
Less current maturities (201,146) (76,692) (25,757)
--------------------------------------
$ 382,775 $554,092 $404,476
======================================
</TABLE>
TWENTY-SEVEN
<PAGE> 12
Albertson's, Inc.
In connection with the Company's 1993 purchase of its common stock
from the estate of J.A. Albertson, the Company's founder, $252.1 million of
medium-term notes due from 1996 to 2000 were issued under a shelf registration
statement filed with the Securities and Exchange Commission in 1993. Interest
on these notes is paid semiannually.
In connection with the 1992 Jewel Osco Acquisition and subsequent
issuance of the 6.375% notes and medium-term notes due from 1993 to 1995, a
shelf registration statement was filed with the Securities and Exchange
Commission in 1992 covering debt securities in the amount of $500 million
available for issuance from time to time. As of February 2, 1995, $200 million
of the debt remained available for issuance in the form of medium-term notes.
Interest on the 6.375% notes and medium-term notes is paid semiannually.
The Company has in place a $400 million commercial paper program.
Interest on the outstanding commercial paper borrowings ranges from 5.8% to
6.31% with an effective weighted average rate of 5.96%. The Company has
established the necessary credit facilities, through its revolving credit
agreement, to refinance the commercial paper borrowings on a long-term basis.
These borrowings have been classified as noncurrent because it is the Company's
intent to refinance these obligations on a long-term basis.
The industrial revenue bonds are payable in varying annual
installments through 2011, with interest paid semiannually at 4.2% to 9.875%.
The Company has pledged real estate with a cost of $15,786,000 as
collateral for the mortgage notes, which are payable monthly, quarterly and
semiannually, including interest at 7.5% to 16.5%. The notes mature from 1995
to 2011.
The scheduled maturities of long-term debt outstanding at February 2,
1995 are summarized as follows: $201,146,000 in 1995, $78,281,000 in 1996,
$1,032,000 in 1997, $86,560,000 in 1998, $110,913,000 in 1999 and $105,989,000
thereafter.
In October 1994, the Company entered into a new revolving credit
agreement with several banks, whereby the Company may borrow principal amounts
up to $400 million at varying interest rates any time prior to October 5, 1999.
The agreement contains certain covenants, the most restrictive of which
requires the Company to maintain consolidated tangible net worth, as defined,
of at least $750 million.
In addition to amounts available under the revolving credit agreement,
the Company had available lines of credit from banks at prevailing interest
rates in the amount of $35 million at February 2, 1995. The cash balances
maintained at these banks are not legally restricted.
The weighted average interest rate on notes payable outstanding under
the Company's lines of credit was 3.32% as of February 3, 1994 and 3.17% as of
January 28, 1993.
Interest expense, net, was as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt $42,780 $32,164 $26,862
Capitalized leases 13,412 12,233 11,560
Capitalized interest (3,974) (4,219) (4,617)
------------------------------------
Interest expense 52,218 40,178 33,805
Net bank service charges 9,923 10,806 9,319
------------------------------------
Interest expense, net $62,141 $50,984 $43,124
====================================
</TABLE>
Interest expense, net for 1993 included a reduction of $9.7 million
due to the successful resolution of a tax issue for which interest expense had
previously been accrued.
TWENTY-EIGHT
<PAGE> 13
Albertson's, Inc.
Capital Stock
On March 10, 1993, pursuant to a 1979 agreement, the Company purchased
21,976,320 shares of its common stock from the estate of J.A. Albertson, the
Company's founder, at a cost of $517.5 million or $23.55 per share. This
purchase was financed through the reissuance of 10,400,000 shares of treasury
stock at $26.25 per share, netting $264.5 million, and the issuance of $252.1
million in medium-term notes. The remaining 11,576,320 treasury shares were
retired.
On March 2, 1987, the Board of Directors adopted a stockholder rights
plan, which was amended on August 31, 1987, November 28, 1988, September 6,
1989 and September 6, 1994. Under the plan, stockholders of record on March 23,
1987 received a dividend distribution of one nonvoting right for each share of
common stock. Subject to certain exceptions, one right has been or will be
issued with each share of common stock issued after March 23, 1987. The rights
are attached to all common stock certificates and no separate rights
certificate will be distributed. Each right entitles the holder to purchase one
share of the Company's common stock at a price of $60.00. The rights are
exercisable for shares of common stock upon the earlier of the tenth business
day following (i) the public announcement that a person or group has acquired,
or has obtained the right to acquire, beneficial ownership of 20% or more of
the outstanding common stock, or (ii) the commencement of, or public
announcement of an intention to make, a tender offer or exchange offer if, upon
consummation, such person or group would be the beneficial owner of 20% or more
of the then outstanding common stock.
Additionally, if any person or group becomes the beneficial owner of
more than 20% of the outstanding common stock, each right will entitle its
holder, other than such person or group, upon payment of the $60.00 exercise
price, to purchase common stock with a deemed market value of twice the
exercise price. The purchase rights for common stock will not be exercisable if
the 20% acquisition is made pursuant to a tender or exchange offer for all
outstanding common stock which a majority of certain directors of the Company
deem to be in the best interests of the Company and its stockholders. If there
is a merger with an acquirer of 20% or more of the Company's common stock and
the Company is not the surviving corporation, or more than 50% of the Company's
assets or earning power is transferred or sold, each right will entitle its
holder, other than the acquirer, to purchase, or in certain instances to
receive the cash value of, the acquiring company's common stock with a deemed
market value of twice the exercise price.
All of the rights may be redeemed by the Board of Directors, and under
certain circumstances, with the approval of a majority of the continuing
directors (as defined in the plan), at a price of $.00625 per right until the
earlier of (i) ten business days after the public announcement that a person or
group has acquired beneficial ownership of 20% or more of the outstanding
common stock or (ii) the date the stockholder rights plan expires. The rights,
which are not entitled to dividends, expire on March 23, 1997.
Since 1987, the Board of Directors has continuously adopted or renewed
plans under which the Company is authorized, but not required, to purchase
shares of its common stock on the open market. The current plan was adopted by
the Board on March 6, 1995, and authorizes the Company to purchase up to 5
million shares through March 31, 1996. The Company has purchased and retired an
equivalent of 12.4 million shares of its common stock for $156.2 million under
these plans.
Income Taxes
At the beginning of 1992, the Company elected early adoption of the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." This Statement requires that the liability
method of accounting for income taxes be used rather than the deferred method
previously used. The Company elected not to restate prior years' consolidated
financial statements. The cumulative effect of this accounting change was to
decrease 1992 net earnings by $2.8 million or $.01 per share.
TWENTY-NINE
<PAGE> 14
Albertson's, Inc.
Deferred tax assets and liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Nondeductible accruals for:
Self-insurance $ 66,884 $ 54,811 $ 49,446
Lease accounting 20,689 21,626 20,335
Vacations 18,386 17,129 14,332
Postemployment benefits 10,447
Litigation 9,508 11,968
Property valuation 8,868 8,828 5,197
Deferred compensation 6,504 5,742 5,007
Pension costs 2,485 2,133 1,683
Other 6,294 5,955 5,652
Income unearned for financial reporting purposes 31,298 11,846 11,739
Costs capitalized for tax purposes 11,499 10,803 5,808
----------------------------------------
Total deferred tax assets 192,862 150,841 119,199
Deferred tax liabilities:
Accelerated depreciation for tax purposes (110,590) (103,219) (86,441)
Pension costs expensed for tax purposes (18,040) (13,312) (10,000)
Other (4,026) (3,109) (3,573)
---------------------------------------
Total deferred tax liabilities (132,656) (119,640) (100,014)
---------------------------------------
Net deferred tax assets $ 60,206 $ 31,201 $ 19,185
=======================================
</TABLE>
No valuation allowances were considered necessary in the calculation of
deferred tax assets.
Income tax expense on continuing operations consists of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $239,937 $191,343 $133,872
State 40,508 33,580 26,052
--------------------------------------
280,445 224,923 159,924
Deferred:
Federal (16,218) (10,222) 7,193
State (2,738) (1,794) 1,269
--------------------------------------
(18,956) (12,016) 8,462
Amortization of deferred investment tax credits (208) (373) (740)
--------------------------------------
$261,281 $212,534 $167,646
======================================
</TABLE>
THIRTY
<PAGE> 15
Albertson's, Inc.
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred taxes resulted from:
Income unearned for financial reporting purposes $(19,452) $ (107) $ 1,871
Accelerated depreciation for tax purposes 7,371 16,778 9,682
Self-insurance (12,073) (5,365) (2,179)
Litigation 2,460 (11,968)
Costs capitalized for tax purposes (696) (4,994) (129)
Property valuation (40) (3,631) (152)
Other 3,474 (2,729) (631)
---------------------------------------
$(18,956) $(12,016) $ 8,462
=======================================
</TABLE>
Total tax expense for 1994 was $250,635,000 consisting of taxes on
continuing operations of $261,281,000 and tax benefits of $10,646,000 for the
cumulative effect of a change in accounting for postemployment benefits. Total
tax expense for 1992 was $167,992,000 consisting of taxes on continuing
operations of $167,646,000, tax expense of $2,765,000 for the cumulative effect
of a change in accounting for income taxes and tax benefits of $2,419,000
attributed to the cumulative effect of a change in accounting for
postretirement health care benefits.
The reconciliations between the federal statutory tax rates and the
Company's effective tax rates are as follows (in thousands):
<TABLE>
<CAPTION>
1994 PERCENT 1993 Percent 1992 Percent
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate $237,528 35.0 $193,275 35.0 $150,865 34.0
State income taxes net of federal
income tax benefit 24,530 3.6 20,612 3.8 16,364 3.7
Amortization of deferred
investment tax credits (208) (373) (0.1) (740) (0.2)
Other (569) (0.1) (980) (0.2) 1,157 0.3
---------------------------------------------------------
$261,281 38.5 $212,534 38.5 $167,646 37.8
=========================================================
</TABLE>
Stock Options
The Company issued stock under stock option plans adopted in 1986,
1982 and 1975. The 1986 plan authorized the granting of options with respect to
8,000,000 shares of the Company's common stock. The 1982 plan expired on
February 29, 1992, and the 1975 plan expired on April 6, 1985. Expiration of
the 1982 and 1975 plans did not affect the rights of optionees for any options
outstanding. There are no options remaining to be exercised under the 1975
plan.
THIRTY-ONE
<PAGE> 16
Albertson's, Inc.
The following is a summary of stock option activity and number of
shares reserved for outstanding options:
<TABLE>
<CAPTION>
Option Number
Price Per Share of Shares
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 30, 1992 $ .88 to $22.63 4,232,400
Granted 24.31 to 24.31 344,000
Exercised .88 to 6.25 (398,400)
Forfeited 2.95 to 16.88 (128,200)
----------------------------------
Balance at January 28, 1993 1.88 to 24.31 4,049,800
Granted 25.13 to 25.13 479,000
Exercised 1.88 to 8.69 (327,947)
Forfeited 2.95 to 24.31 (145,200)
Canceled 24.31 to 24.31 (4,000)
----------------------------------
Balance at February 3, 1994 1.88 to 25.13 4,051,653
Granted 28.63 to 28.63 141,000
Exercised 1.88 to 16.88 (593,700)
Forfeited 6.25 to 25.13 (131,000)
----------------------------------
Balance at February 2, 1995 $ 2.92 to $28.63 3,467,953
==================================
</TABLE>
Options on 179,453 shares were exercisable at February 2, 1995. In
addition, there were 3,918,000 shares of common stock under the 1986 plan
reserved for the granting of additional options.
Employee Benefit Plans
Substantially all employees working over 20 hours per week are covered
by retirement plans. Union employees participate in multi-employer retirement
plans under collective bargaining agreements. The Company sponsors two funded
plans, Albertson's Salaried Employees Pension Plan and Albertson's Employees
Corporate Pension Plan, which are defined benefit, noncontributory plans for
eligible employees who are 21 years of age with one or more years of service
and (with certain exceptions) are not covered by collective bargaining
agreements. Benefits paid to retirees are based upon age at retirement, years
of credited service and average compensation. The Company's funding policy for
these plans is to contribute amounts deductible for federal income tax
purposes.
The Company also sponsors an unfunded Executive Pension Makeup Plan.
This plan is nonqualified and provides certain key employees defined pension
benefits which supplement those provided by the Company's other retirement
plans.
Net periodic pension cost for the Company plans was as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 19,523 $ 12,726 $ 10,983
Interest cost on projected benefit obligations 15,097 12,687 10,805
Actual return on assets (145) (27,696) (15,596)
Net amortization and deferral (19,860) 11,515 1,809
-------------------------------------
Net periodic pension cost $ 14,615 $ 9,232 $ 8,001
=====================================
</TABLE>
THIRTY-TWO
<PAGE> 17
Albertson's, Inc.
The following table sets forth the funded status of Albertson's
Salaried Employees Pension Plan and Albertson's Employees Corporate Pension
Plan and the amounts included in other assets in the Company's consolidated
balance sheets (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Plan assets at fair value $240,534 $218,284 $177,825
Actuarial present value of:
Vested benefits 138,322 155,087 101,858
Nonvested benefits 13,460 15,797 7,581
--------------------------------------
Accumulated benefit obligation 151,782 170,884 109,439
Effect of projected future salary increases 27,529 38,508 32,308
--------------------------------------
Projected benefit obligation 179,311 209,392 141,747
--------------------------------------
Plan assets in excess of projected benefit obligation 61,223 8,892 36,078
Unrecognized net (gain) loss (19,535) 19,713 (15,975)
Unrecognized prior service cost 6,274 7,123 7,972
Unrecognized net transition assets (983) (1,171) (1,358)
--------------------------------------
Prepaid pension cost $ 46,979 $ 34,557 $ 26,717
======================================
</TABLE>
Assets of the two funded Company plans are invested in directed
trusts. Assets in the directed trusts are invested in common stocks (including
$33,071,000, $28,937,000 and $26,802,000 of the Company's common stock at
February 2, 1995, February 3, 1994 and January 28, 1993, respectively), U.S.
Government obligations, corporate bonds, international equity funds, real
estate and money market funds.
The following table sets forth the status of the unfunded Executive
Pension Makeup Plan and the amounts included in other long-term liabilities in
the Company's consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of:
Vested benefits $ 6,734 $ 6,493 $ 5,490
Nonvested benefits 23 9 1
----------------------------------------
Accumulated benefit obligation 6,757 6,502 5,491
Effect of projected future salary increases 1,408 1,861 2,564
----------------------------------------
Projected benefit obligation 8,165 8,363 8,055
----------------------------------------
Actuarial present value of projected benefit
obligations in excess of plan assets (8,165) (8,363) (8,055)
Unrecognized net (gain) loss (870) (7) 458
Unrecognized prior service cost 1,041 1,136 1,231
Unrecognized net transition liability 1,507 1,688 1,869
Additional minimum liability (271) (956) (994)
----------------------------------------
Accrued pension cost $(6,758) $(6,502) $(5,491)
========================================
</TABLE>
THIRTY-THREE
<PAGE> 18
Albertson's, Inc.
Net periodic pension cost is determined using assumptions as of the
beginning of each year. The projected benefit obligation and related funded
status is determined using assumptions as of the end of each year.
Assumptions used at the end of each year for all Company-sponsored
plans were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted-average discount rate 8.5% 7.0% 8.0%
Annual salary increases 4.5% 4.5% 4.5%
Expected long-term rate of return on assets 9.0% 9.0% 9.0%
</TABLE>
The Company also contributes to various plans under industrywide
collective bargaining agreements which provide for pension benefits. Total
contributions to these plans were $17,354,000 for 1994, $16,025,000 for 1993
and $19,295,000 for 1992.
The Company sponsors a tax deferred savings plan which is a salary
deferral plan pursuant to Section 401(k) of the Internal Revenue Code.
Employees eligible to participate are those who are at least 21 years of age
with one or more years of service and (with certain exceptions) are not covered
by collective bargaining agreements. All contributions are made by the
employees and the Company incurs no material costs in connection with this
plan.
At the beginning of 1994, the Company adopted the provisions of SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." This statement
requires employers to recognize an obligation for benefits provided to former
or inactive employees after employment but before retirement. The Company is
self-insured for its employees' short-term and long-term disability plans which
are the primary benefits paid to inactive employees prior to retirement. In
prior years, expenses for disability benefits were charged to earnings under
the pay-as-you-go method. The total cumulative effect of this accounting change
(net of $10.6 million in tax benefits) was to decrease net earnings by $17.0
million or $.07 per share. The impact of this change on current year operations
was not material. As of February 2, 1995, $25.8 million of the obligation for
postemployment benefits is included with other long-term liabilities and $3.0
million is included with current salaries and related liabilities in the
Company's consolidated balance sheets.
Most retired employees of the Company are eligible to remain in its
health and life insurance plans. Retirees who elect to remain in the
Company-sponsored plans are charged a premium which is equal to the difference
between the estimated costs of the benefits for the retiree group and a fixed
contribution amount made by the Company.
At the beginning of 1992, the Company elected early adoption of the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." In prior years, the Company charged expenses relating to
postretirement benefits to earnings under the pay-as-you-go method. The Company
elected immediate recognition of a transition obligation equal to the
accumulated and vested postretirement benefit obligations to existing retirees
and active employees as of the date of adoption. The cumulative effect of this
accounting change (net of $2.4 million in tax benefits) was to decrease 1992
net earnings by $4.1 million or $.01 per share.
Net periodic postretirement benefit cost was as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 812 $ 574 $ 528
Interest cost 669 605 549
---------------------------------------
Net periodic postretirement benefit cost $1,481 $1,179 $1,077
=======================================
</TABLE>
THIRTY-FOUR
<PAGE> 19
Albertson's, Inc.
The following table sets forth the actuarial present value of the
accumulated postretirement benefit obligation (APBO) and related liabilities
included in other long-term liabilities in the Company's consolidated balance
sheets (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Existing retired employees $1,706 $1,613 $1,355
Active employees fully eligible 1,871 1,800 1,526
Other active employees 4,639 5,645 4,354
-------------------------------------
Accumulated postretirement benefit obligation 8,216 9,058 7,235
Unrecognized net gain (loss) and effects
of changes in assumptions 1,402 (963)
-------------------------------------
Accrued postretirement benefit liabilities $9,618 $8,095 $7,235
=====================================
Assumed discount rate 8.5% 7.0% 8.0%
</TABLE>
Annual rates of increases in health care costs are not applicable in
the calculation of the APBO because the Company's contribution is a fixed
amount.
The Company also contributes to various plans under industrywide
collective bargaining agreements which provide for health care benefits to both
active employees and retirees. Total contributions to these plans were
$106,439,000 for 1994, $90,613,000 for 1993 and $83,754,000 for 1992.
The Company has bonus plans for store management personnel and other
key management personnel. Amounts charged to earnings under all bonus plans
were $58,406,000 for 1994, $53,907,000 for 1993 and $52,301,000 for 1992.
Leases
The Company leases a portion of its real estate. The typical lease
period is 25 to 30 years and most leases contain renewal options. Exercise of
such options is dependent on the level of business conducted at the location.
In addition, the Company leases certain equipment. Some leases contain
contingent rental provisions based on sales volume at retail stores or miles
traveled for trucks.
Capitalized leases are calculated using interest rates appropriate at
the inception of each lease. Contingent rents associated with capitalized
leases were $2,141,000 in 1994, $2,716,000 in 1993 and $2,428,000 in 1992.
Following is an analysis of the Company's capitalized leases (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real estate $179,893 $154,157 $145,548
Equipment 133 1,641 1,768
--------------------------------------
$180,026 $155,798 $147,316
--------------------------------------
Accumulated amortization $ 78,183 $ 73,074 $ 72,176
======================================
</TABLE>
THIRTY-FIVE
<PAGE> 20
Albertson's, Inc.
Future minimum lease payments for capitalized lease obligations at
February 2, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Real Estate Equipment Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $ 21,363 $ 36 $ 21,399
1996 21,100 36 21,136
1997 21,202 36 21,238
1998 20,727 12 20,739
1999 20,025 20,025
Remainder 179,698 179,698
---------------------------------------
Total minimum obligations 284,115 120 284,235
Less interest (147,728) (30) (147,758)
---------------------------------------
Present value of net minimum obligations 136,387 90 136,477
Less current portion (6,883) (21) (6,904)
---------------------------------------
Long-term obligations at February 2, 1995 $ 129,504 $ 69 $ 129,573
=======================================
</TABLE>
Minimum obligations have not been reduced by minimum capitalized
sublease rentals of $4,746,000 receivable in the future under noncancelable
capitalized subleases.
Rent expense under operating leases was as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $ 65,566 $ 66,506 $ 66,130
Contingent rent 4,634 4,641 5,003
--------------------------------------
70,200 71,147 71,133
Less sublease rent (19,055) (17,232) (16,511)
--------------------------------------
$ 51,145 $ 53,915 $ 54,622
======================================
</TABLE>
Future minimum lease payments for all noncancelable operating leases
and related subleases having a remaining term in excess of one year at February
2, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Real Estate Subleases
-------------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 64,244 $(11,560)
1996 65,954 (11,422)
1997 66,504 (10,675)
1998 68,779 (10,005)
1999 69,632 (7,459)
Remainder 629,544 (26,220)
-----------------------
Total minimum obligations (receivables) $964,657 $(77,341)
=======================
</TABLE>
The present value of minimum rent payments under operating leases
using an assumed interest rate of 9.5% was approximately $465 million at
February 2, 1995.
THIRTY-SIX
<PAGE> 21
Albertson's, Inc.
Financial Instruments
Financial instruments with off-balance-sheet risk to the Company
include lease guarantees whereby the Company is contingently liable as a
guarantor of certain leases that were assigned to third parties in connection
with various store closures and outstanding letters of credit primarily
associated with the Company's self-insurance programs. Minimum rentals
guaranteed under assigned leases are $5.2 million in 1995 and aggregate $60.9
million for the remaining lease terms, which expire at various dates through
2020. The Company believes the likelihood of a significant loss from these
agreements is remote because of the wide dispersion among third parties and
remedies available to the Company should the primary party fail to perform
under the agreements. As of February 2, 1995, the Company had letters of credit
outstanding of $45.4 million.
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash equivalents and trade
receivables. The Company limits the amount of credit exposure to any one
financial institution and places its temporary cash into investments of high
credit quality. Concentrations of credit risk with respect to trade receivables
are limited due to the dispersion of the Company's operations across different
industries and geographies.
The estimated fair value of cash and cash equivalents, short-term debt
and commercial paper borrowings approximates their carrying amount. The
estimated fair value and carrying amount of all long-term debt borrowings were
as follows (in millions):
<TABLE>
<CAPTION>
FEBRUARY 2, February 3, January 28,
1995 1994 1993
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value $572.7 $645.3 $441.5
Carrying amount 583.9 630.8 430.2
</TABLE>
These fair values were estimated using discounted cash flow analyses, based on
the Company's current incremental borrowing rates for similar types of
borrowing arrangements, when quoted market values were not available. The
Company has not determined the fair value of lease guarantees due to the
inherent difficulty in evaluating the credit worthiness of each tenant.
Legal Proceedings
The Company is involved in routine litigation incidental to
operations. In the opinion of management, the ultimate resolution of these
legal proceedings will not have a material adverse effect on the Company's
financial condition or results of operations.
THIRTY-SEVEN
<PAGE> 22
Albertson's, Inc.
RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Albertson's, Inc. is responsible for the preparation
and integrity of the consolidated financial statements of the Company. The
accompanying consolidated financial statements have been prepared by the
management of the Company, in accordance with generally accepted accounting
principles, using management's best estimates and judgment where necessary.
Financial information appearing throughout this Annual Report is consistent
with that in the consolidated financial statements.
To help fulfill its responsibility, management maintains a system of
internal controls designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and that transactions are executed
in accordance with management's authorizations and are reflected accurately in
the Company's records. The concept of reasonable assurance is based on the
recognition that the cost of maintaining a system of internal accounting
controls should not exceed benefits expected to be derived from the system. The
Company believes that its long-standing emphasis on the highest standards of
conduct and ethics, set forth in comprehensive written policies, serves to
reinforce its system of internal controls.
Deloitte & Touche LLP, independent auditors, audited the consolidated
financial statements in accordance with generally accepted auditing standards
to independently assess the fair presentation of the Company's financial
position, results of operations and cash flows.
The Audit Committee of the Board of Directors, comprised entirely of
outside directors, oversees the fulfillment by management of its
responsibilities over financial controls and the preparation of financial
statements. The Committee meets with internal and external auditors at least
three times per year to review audit plans and audit results. This provides
internal and external auditors direct access to the Board of Directors.
Management recognizes its responsibility to conduct the business of
Albertson's, Inc. in accordance with high ethical standards. This
responsibility is reflected in key policy statements that, among other things,
address potentially conflicting outside business interests of Company
employees and specify proper conduct of business activities. Ongoing
communications and review programs are designed to help ensure compliance with
these policies.
Gary G. Michael A. Craig Olson
Chairman of the Board and Senior Vice President, Finance and
Chief Executive Officer Chief Financial Officer
THIRTY-EIGHT
<PAGE> 23
Albertson's, Inc.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Albertson's, Inc.:
We have audited the accompanying consolidated balance sheets of
Albertson's, Inc. and subsidiaries as of February 2, 1995, February 3, 1994 and
January 28, 1993, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Albertson's, Inc. and
subsidiaries at February 2, 1995, February 3, 1994 and January 28, 1993, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
As discussed in the Notes to Consolidated Financial Statements, in
fiscal year 1994 the Company changed its method of accounting for
postemployment benefits to conform with Statement of Financial Accounting
Standards No. 112.
Deloitte & Touche LLP
Boise, Idaho
March 22, 1995
THIRTY-NINE
<PAGE> 24
Albertson's, Inc.
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
52 WEEKS 53 Weeks 52 Weeks 52 Weeks 52 Weeks
(Dollars in thousands except FEBRUARY 2, February 3, January 28, January 30, January 31,
per share data) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales $11,894,621 $11,283,678 $10,173,676 $8,680,467 $8,218,562
Gross profit 3,011,356 2,791,154 2,452,852 2,081,517 1,924,681
Interest expense:
Debt 38,806 27,945 22,245 5,863 9,351
Capitalized lease obligations 13,412 12,233 11,560 12,278 11,786
Earnings before income taxes and
cumulative effects of
accounting changes 678,652 552,215 443,721 406,394 366,009
Income taxes 261,281 212,534 167,646 148,600 132,235
Earnings before cumulative
effects of accounting changes 417,371 339,681 276,075 257,794 233,774
Cumulative effects of
accounting changes (17,006) (6,858)
Net earnings 400,365 339,681 269,217 257,794 233,774
Net earnings as a percent
to sales 3.37% 3.01% 2.65% 2.97% 2.84%
----------------------------------------------------------------------------
COMMON STOCK DATA:
Earnings per share before
cumulative effects of
accounting changes $1.65 $1.34 $1.04 $ .97 $ .87
Cumulative effects of
accounting changes (.07) (.02)
Earnings per share 1.58 1.34 1.02 .97 .87
Cash dividends per share .44 .36 .32 .28 .24
Book value per share 6.65 5.48 5.25 4.54 4.06
----------------------------------------------------------------------------
FINANCIAL POSITION:
Total assets $ 3,621,729 $ 3,294,895 $ 2,945,573 $2,216,247 $2,013,510
Working capital 94,150 132,169 200,483 99,039 91,824
Long-term debt 382,775 554,092 404,476 52,510 56,056
Capitalized lease obligations 129,573 110,919 103,764 99,159 103,039
Stockholders' equity 1,687,893 1,389,379 1,388,428 1,199,452 1,087,882
----------------------------------------------------------------------------
OTHER YEAR END STATISTICS:
Number of stores 720 676 656 562 531
Number of employees:
Total 76,000 75,000 71,000 60,000 58,000
Full-time equivalents 60,000 58,000 54,000 45,000 44,000
</TABLE>
o Refer to the "Nonrecurring Charge" and "Indebtedness" notes in Notes to
Consolidated Financial Statements regarding the 1993 charge to cover the
settlement of a lawsuit and the reduction of interest expense due to the
successful resolution of a tax issue for which interest expense had
previously been accrued.
o Refer to the "Acquisition" note in Notes to Consolidated Financial
Statements regarding the 1992 acquisition from American Stores Company.
o Refer to the "Income Taxes" and "Employee Benefit Plans" notes in Notes to
Consolidated Financial Statements regarding the 1994 and 1992 adoption of
new accounting standards.
o Common stock data has been adjusted for the two-for-one stock split
distributed October 4, 1993.
FORTY
<PAGE> 25
Albertson's, Inc.
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in thousands
except per share data - Unaudited) First Second Third Fourth Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales $2,909,808 $2,987,680 $2,928,012 $3,069,121 $11,894,621
Gross profit 722,755 750,912 740,410 797,279 3,011,356
Earnings before cumulative effect
of accounting change 85,157 93,677 94,326 144,211 417,371
Net earnings 68,151 93,677 94,326 144,211 400,365
Earnings per share before
cumulative effect of
accounting change .34 .37 .37 .57 1.65
Earnings per share .27 .37 .37 .57 1.58
----------------------------------------------------------------------
1993
Sales $2,719,633 $2,768,242 $2,733,773 $3,062,030 $11,283,678
Gross profit 661,487 672,577 668,057 789,033 2,791,154
Net earnings 74,137 75,870 62,712 126,962 339,681
Earnings per share .29 .30 .25 .50 1.34
----------------------------------------------------------------------
</TABLE>
The Company estimates the quarterly LIFO reserves which cannot be accurately
determined until year end. The LIFO method of valuing inventories increased
(decreased) net earnings and earnings per share as follows (in thousands except
per share data):
<TABLE>
<CAPTION>
First Second Third Fourth Year
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Net earnings $(7,380) $(5,966) $(1,660) $9,381 $(5,625)
Earnings per share (.03) (.02) (.01) .04 (.02)
------------------------------------------------------------------
1993
Net earnings $(6,978) $(6,479) $9,495 $(3,962)
Earnings per share (.03) (.03) .04 (.02)
------------------------------------------------------------------
</TABLE>
o In 1994, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." The Company's first quarter net income has been restated to
reflect a correction of the cumulative effect of the adoption of this
statement. The cumulative effect amounted to $17.0 million, or $.07 per
share, compared to $6.4 million, or $.03 per share, as previously reported.
Refer to the "Employee Benefit Plans" note in Notes to Consolidated
Financial Statements.
o The fourth quarter of 1993 was a 14-week quarter.
o Net earnings and earnings per share for the third quarter of 1993 were
reduced by $12.4 million or $.05 per share for a nonrecurring charge to
cover the settlement of a lawsuit and for reduced interest expense for the
successful resolution of a tax issue for which interest expense had
previously been accrued. Refer to the "Nonrecurring Charge" and
"Indebtedness" notes in Notes to Consolidated Financial Statements.
o Earnings per share have been adjusted to reflect the two-for-one stock split
distributed October 4, 1993.
FORTY-ONE
<PAGE> 26
ALBERTSON'S, INC.
STOCKHOLDERS' INFORMATION
GENERAL INFORMATION
ADDRESS
ALBERTSON'S, INC.
General Offices
250 Parkcenter Boulevard
P.O. Box 20
Boise, Idaho 83726
Telephone: (208) 385-6200
AUDITORS
Deloitte & Touche LLP
Boise, Idaho
STOCK TRANSFER AGENT AND REGISTRAR
Chemical Trust Company of California (Chemical Trust)
Securityholder Relations Department
50 California Street, 10th Floor
San Francisco, California 94111
CO-TRANSFER AGENT AND REGISTRAR
West One Bank, Idaho
Boise, Idaho
STOCKHOLDERS OF RECORD
There were 17,000 stockholders of record at March 31, 1995.
ANNUAL MEETING
The 1995 Annual Meeting of Stockholders will be held at 10:00 a.m., Mountain
Daylight Time on Friday, May 26, 1995 in the Byries Room, Boise Centre on the
Grove, 850 Front Street, Boise, Idaho.
DIVIDEND INVESTMENT PLAN
The Company's Dividend Investment Plan allows stockholders owning at least 15
shares of record to automatically invest the quarterly dividends or to purchase
additional shares under the Plan with voluntary cash payments. More information
may be obtained from Chemical Trust (800) 982-7649 or from the Corporate
Secretary of Albertson's, Inc.
INFORMATION CONTACT
Information on individual accounts or on procedures necessary to make changes
in an account is provided by Chemical Trust at (800) 356-2017 between the hours
of 8:30 a.m. and 8:30 p.m., Eastern Time, after a stockholder identifies his or
her account by providing a taxpayer identification number, the registration
name on the securities and the address of record.
When directing correspondence to Chemical Trust at the address shown,
stockholders are reminded to include a reference to Albertson's, Inc.
COMPANY PROFILE AVAILABLE
A copy of the Company Profile, which contains a discussion of our core values,
including equal opportunity, environmental quality and community support, as
well as statistical information about the Company, is available to
stockholders, without charge, upon request to the Corporate Secretary of
Albertson's, Inc.
FORM 10-K AVAILABLE
A copy of Form 10-K Annual Report filed with the Securities and Exchange
Commission for Albertson's Inc. fiscal year ended February 2, 1995 is available
to stockholders, without charge, upon request to the Corporate Secretary of
Albertson's, Inc.
COMPANY STOCK INFORMATION
The Company's stock is traded on the New York and Pacific Stock Exchanges under
the symbol ABS. An analysis of high and low stock prices by quarter is as
follows:
<TABLE>
<CAPTION>
First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------
High Low High Low High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 30-7/8 25-1/8 28-3/4 25-3/4 30-1/4 26-1/8 30-5/8 27-5/8 30-7/8 25-1/8
1993 29 23-3/8 29-3/4 25-1/4 29-1/4 24-1/8 28 23-3/8 29-3/4 23-3/8
1992 22-1/2 19-5/8 21-3/4 18-1/2 23-3/4 19-5/8 26-3/4 22-1/8 26-3/4 18-1/2
</TABLE>
Cash dividends per share were:
<TABLE>
<CAPTION>
First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
1994 $.11 $.11 $.11 $.11 $.44
1993 .09 .09 .09 .09 .36
1992 .08 .08 .08 .08 .32
</TABLE>
- - Stock prices and dividend information have been adjusted to reflect the
two-for-one stock split distributed October 4, 1993.
- - In March 1995, the Board of Directors increased dividends to an annual rate
of $.52 per share, an increase of 18.2% over 1994. The new quarterly rate of
$.13 per share will be paid on May 25, 1995 to stockholders of record on May
5, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALBERTSON'S
ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED FEBRUARY 2, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-02-1995
<PERIOD-START> FEB-04-1994
<PERIOD-END> FEB-02-1995
<CASH> 50,224
<SECURITIES> 0
<RECEIVABLES> 110,686
<ALLOWANCES> 1,362
<INVENTORY> 948,561
<CURRENT-ASSETS> 1,189,589
<PP&E> 3,496,257
<DEPRECIATION> 1,186,898
<TOTAL-ASSETS> 3,621,729
<CURRENT-LIABILITIES> 1,095,439
<BONDS> 512,348
<COMMON> 253,984
0
0
<OTHER-SE> 1,433,909
<TOTAL-LIABILITY-AND-EQUITY> 3,621,729
<SALES> 11,894,621
<TOTAL-REVENUES> 11,894,621
<CGS> 8,883,265
<TOTAL-COSTS> 8,883,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,141
<INCOME-PRETAX> 678,652
<INCOME-TAX> 261,281
<INCOME-CONTINUING> 417,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (17,006)
<NET-INCOME> 400,365
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
</TABLE>
