<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For 13 Weeks Ended: May 1, 1997 Commission File Number: 1-6187
ALBERTSON'S, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 82-0184434
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 Parkcenter Blvd., P.O. Box 20, Boise, Idaho 83726
- ----------------------------------------------- ----------
(Address) (Zip Code)
Registrant's telephone number, including area code: (208) 395-6200
--------------
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 [ ]
Number of Registrant's $1.00 par value
common shares outstanding at May 22, 1997: 250,106,706
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FORM 10-Q
PART I. FINANCIAL INFORMATION
ALBERTSON'S, INC.
CONSOLIDATED EARNINGS
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------------------
May 1, 1997 May 2, 1996
------------ -----------
<S> <C> <C>
Sales $3,607,541 $3,343,941
Cost of sales 2,678,835 2,485,326
----------- -----------
Gross profit 928,706 858,615
Selling, general and administrative expenses 731,988 662,052
----------- -----------
Operating profit 196,718 196,563
Other (expenses) income:
Interest, net (19,314) (14,957)
Other, net (311) 529
----------- -----------
Earnings before income taxes 177,093 182,135
Income taxes 67,827 69,758
----------- ----------
NET EARNINGS $ 109,266 $ 112,377
=========== ==========
EARNINGS PER SHARE $ .44 $ .45
DIVIDENDS DECLARED PER SHARE $ .16 $ .15
Weighted average common shares outstanding 250,633 251,929
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 3
FORM 10-Q
ALBERTSON'S, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
May 1, 1997 January 30,
(unaudited) 1997
-------------- ------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 50,353 $ 90,865
Accounts and notes receivable 101,309 98,364
Inventories 1,151,822 1,201,067
Prepaid expenses 46,941 42,823
Deferred income taxes 47,403 42,804
---------- ----------
TOTAL CURRENT ASSETS 1,397,828 1,475,923
OTHER ASSETS 178,442 184,070
LAND, BUILDINGS AND EQUIPMENT 4,742,978 4,622,655
Less accumulated depreciation and amortization 1,629,392 1,568,015
---------- ----------
3,113,586 3,054,640
---------- ----------
$4,689,856 $4,714,633
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 695,979 $ 682,305
Salaries and related liabilities 133,842 135,681
Taxes other than income taxes 56,186 67,086
Income taxes 86,472 14,409
Self-insurance 66,716 63,999
Unearned income 49,387 36,539
Other current liabilities 58,886 46,161
Current maturities of long-term debt 86,444 975
Current capitalized lease obligations 8,089 7,938
---------- ---------
TOTAL CURRENT LIABILITIES 1,242,001 1,055,093
LONG-TERM DEBT 657,016 921,704
CAPITALIZED LEASE OBLIGATIONS 127,797 130,050
OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS 366,384 360,768
STOCKHOLDERS' EQUITY:
Preferred stock - $1 par value; authorized -
10,000,000 shares; issued - none
Common stock - $1 par value; authorized -
600,000,000 shares; issued - 250,132,616
shares and 250,690,105 shares, respectively 250,133 250,690
Capital in excess of par value 92
Retained earnings 2,046,525 1,996,236
---------- ----------
2,296,658 2,247,018
---------- ----------
$4,689,856 $4,714,633
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
FORM 10-Q
ALBERTSON'S, INC.
CONSOLIDATED CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
13 WEEKS ENDED
-----------------------------
May 1, 1997 May 2, 1996
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 109,266 $ 112,377
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 79,136 69,604
Net deferred income taxes (7,694) (5,467)
Changes in operating assets and liabilities:
Receivables and prepaid expenses (7,063) 234
Inventories 49,245 (12,645)
Accounts payable 13,674 (31,433)
Other current liabilities 70,301 74,910
Self-insurance 5,205 2,010
Unearned income 16,552 827
Other long-term liabilities 2,592 (2,810)
---------- ----------
Net cash provided by operating activities 331,214 207,607
CASH FLOWS FROM INVESTING ACTIVITIES:
Net capital expenditures (138,486) (133,540)
Decrease (increase) in other assets 5,628 (12,991)
---------- ----------
Net cash used in investing activities (132,858) (146,531)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings (1,871) (78,779)
Net commercial paper activity (179,089) 34,971
Stock purchased and retired (21,759)
Proceeds from stock options exercised 1,454 416
Cash dividends paid (37,603) (32,749)
---------- ----------
Net cash used in financing activities (238,868) (76,141)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (40,512) (15,065)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF QUARTER 90,865 69,113
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 50,353 $ 54,048
========= =========
NON-CASH ACTIVITIES:
Capitalized lease obligations incurred $ 2,700
Capitalized lease obligations terminated $ 361
Tax benefits related to stock options 698 230
CASH PAYMENTS FOR:
Income taxes 2,481 10,552
Interest, net of amounts capitalized 5,324 10,783
</TABLE>
See Notes to Consolidated Financial Statements.
4
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FORM 10-Q
ALBERTSON'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Basis of Presentation
- ---------------------
The accompanying unaudited 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.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments necessary to present fairly, in all
material respects, the results of operations of the Company for the periods
presented. Such adjustments consisted only of normal recurring items. The
statements have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and the accompanying notes included in the Company's 1996
Annual Report.
The balance sheet at January 30, 1997 has been taken from the audited
financial statements at that date.
The preparation of the Company's consolidated financial statements, in
conformity with generally accepted accounting principles, requires management to
make estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Historical operating results are not necessarily indicative of future
results.
Reclassifications
- -----------------
Certain reclassifications have been made in the prior year's financial
statements to conform to classifications used in the current year.
5
<PAGE> 6
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The following table sets forth certain income statement components
expressed as a percent to sales and the percentage change from the previous year
in the amounts of such components:
<TABLE>
<CAPTION>
Percent to Sales Percentage
-------------------
13 weeks ended Increase
-------------------
5-1-97 5-2-96 (Decrease)
-------- -------- ----------
<S> <C> <C> <C>
Sales 100.00% 100.00% 7.9%
Gross profit 25.74 25.68 8.2
Selling, general and
administrative
expenses 20.29 19.80 10.6
Operating profit 5.45 5.88 0.1
Net interest expense 0.54 0.45 29.1
Earnings before
income taxes 4.91 5.45 (2.8)
Net earnings 3.03 3.36 (2.8)
</TABLE>
Sales increased as a result of increased comparable store sales (which
includes inflation) and the continued expansion of net retail square footage.
Comparable store sales, stores (including replacement stores) that have been in
operation for the full 13 week periods of both years, increased 0.9%. Management
estimates that annual inflation in products the Company sells was approximately
0.9%. During the quarter seven stores were opened, no stores were closed and
eight store remodels were completed. Net retail square footage increased 8.5%
from May 2, 1996. In addition to new store development, the Company plans to
increase sales through its continued investment in specific programs initiated
in 1996. Such programs include the Front End Manager program, the home meal
solutions process called "Quick Fixin' Ideas," expansion of the Company's
pharmacy business and increased emphasis on training programs utilizing Computer
Guided Training. The Company also began a new advertising campaign in February
1997, supported by the largest investment in broadcast media in the Company's
history.
Gross profit, as a percent to sales, increased due primarily to the
continued utilization and increased efficiencies of the Company-owned
distribution facilities. Improvements in retail gross profit were offset by
increased costs associated with the Company's new advertising campaign. The
Company's distribution centers provide approximately 77% of all products
purchased by retail stores. Utilization of the Company's distribution system has
enabled the Company to better control product costs and product distribution.
The pre-tax LIFO charge reduced gross profit by $10.9 million (0.30% to sales)
for the 13 weeks ended May 1, 1997 and $12.4 million (0.37% to sales) for the 13
weeks ended May 2, 1996.
Selling, general and administrative expenses, as a percent to sales,
increased due primarily to increased salary and related benefit costs
6
<PAGE> 7
FORM 10-Q
resulting from the Company's initiatives to increase sales, and increased
depreciation expense associated with the Company's expansion program.
The increase in net interest expense resulted from higher average
outstanding debt during the first quarter of 1997 as compared to the first
quarter of 1996.
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 the first quarter of 1997 was $331 million compared
to $208 million in the prior year. The increase from the prior year in cash
provided by operating activities was primarily due to changes in inventories,
accounts payable and unearned income.
During the quarter ended May 1, 1997 the Company spent $138 million for
net capital expenditures, $38 million for the payment of dividends and $22
million to purchase and retire stock. The Company also reduced commercial paper
borrowings by $179 million.
The Company 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 $150 million of commercial paper borrowings
outstanding at May 1, 1997 compared to $329 million at January 30, 1997 and $244
million at May 2, 1996.
Since 1987 the Board of Directors has continuously adopted or renewed
programs under which the Company is authorized, but not required, to purchase
and retire shares of its common stock. The current program was adopted by the
Board on March 3, 1997 and authorizes the Company to purchase and retire up to 7
million shares through March 31, 1998. During the quarter ended May 1, 1997,
676,900 shares were purchased and retired pursuant to this program.
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995
- -------------------------------------------------------------
From time to time, information provided by the Company, including
written or oral statements made by its representatives, may contain
forward-looking information as defined in the Private Securities Litigation
Reform Act of 1995. All statements, other than statements of historical facts,
which address activities, events or developments that the Company expects or
anticipates will or may occur in the future, including such things as expansion
and growth of the Company's business, future capital expenditures and the
Company's business strategy, contain forward-looking information. In reviewing
such information it should be kept in mind that actual results may differ
materially from those projected or suggested in such forward-looking
information. This forward-looking information is based on various factors and
was derived utilizing numerous assumptions. Many of these factors have
previously been identified in filings or statements made by or on behalf of the
Company.
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<PAGE> 8
FORM 10-Q
Important assumptions and other important factors that could cause
actual results to differ materially from those set forth in the forward-looking
information include: changes in the general economy, changes in consumer
spending, competitive factors and other factors affecting the Company's business
in or beyond the Company's control. These factors include changes in the rate of
inflation, changes in state or federal legislation or regulation, adverse
determinations with respect to litigation or other claims, labor negotiations,
ability to recruit and develop employees, ability to develop new stores or
complete remodels as rapidly as planned and stability of product costs.
Other factors and assumptions not identified above could also cause the
actual results to differ materially from those set forth in the forward-looking
information.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Three civil lawsuits filed in September 1996 as purported state-wide
(Washington, Choate v. Albertson's, Inc.; California, Gloege v. Albertson's,
Inc.; and Florida, Mitchell v. Albertson's, Inc.) class actions and one civil
lawsuit filed in April 1997 in federal court in Boise, Idaho as a purported
several-state (the remaining 17 states in which the Company operates, Barton v.
Albertson's, Inc.) class action have been brought against the Company alleging
that (i) the Company has a wide-spread practice of permitting its hourly-paid
employees to work "off-the-clock" without being paid for their work and (ii) the
Company's bonus and worker's compensation plans are unlawful. These suits are
being sponsored and financed by the United Food & Commercial Workers (UFCW),
International Union. In addition, two other similar cases have been filed as
purported class actions which in effect duplicate the coverage of the UFCW
sponsored suits (Flach v. Albertson's, Inc. filed in state court in Colorado in
April 1997 and Rose v. Albertson's, Inc. filed in federal court in Boise, Idaho
in April 1997).
The Company has firm and long-standing policies in place prohibiting
off-the-clock work and has structured its bonus and worker's compensation plans
to comply with all applicable laws. Although these lawsuits are still in their
preliminary stages, the Company believes it has strong defenses and intends to
vigorously defend against these lawsuits. The Company further believes that the
UFCW sponsored suits are part of a broader and continuing effort by the UFCW and
some of its locals to pressure the Company to unionize employees who have not
expressed a desire to be represented by a union.
In the opinion of management, the ultimate resolution of these actions
will not have a material adverse effect on the Company's financial condition or
results of operations.
The Company is also 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.
8
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FORM 10-Q
Item 2. Changes in Securities
- ------------------------------
In accordance with the Company's $600 million revolving credit
agreement, the Company's consolidated tangible net worth, as defined, shall not
be less than $750 million.
Item 3. Defaults upon Senior Securities
- ----------------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Company held its Annual Meeting of Stockholders on May 23, 1997 and
transacted the following business:
(a) Election of Class II Directors:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
--------------------- ----------- --------------
<S> <C> <C>
Kathryn Albertson 219,482,850 2,965,951
A. Gary Ames 219,678,545 2,770,256
John B. Carley 219,664,706 2,784,095
Paul I. Corddry 219,674,448 2,774,353
Beatriz Rivera 219,547,665 2,901,136
</TABLE>
Election of Class I Director:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
--------------------- ----------- --------------
<S> <C> <C>
Thomas L. Stevens, Jr. 219,605,536 2,843,265
Continuing Class III Directors:
Cecil D. Andrus John B. Fery Warren E. McCain
J.B. Scott Will M. Storey
Continuing Class I Directors:
Clark A. Johnson Charles D. Lein Gary G. Michael
Steven D. Symms
</TABLE>
(b) Ratification of Appointment of Independent Auditors:
<TABLE>
<CAPTION>
Votes Broker
Votes For Against Abstentions Nonvotes
------------- ----------- ----------- ----------
<S> <C> <C> <C>
221,497,206 390,145 561,450 0
</TABLE>
(c) Approval of Albertson's, Inc. Senior Operations Executive
Officer Bonus Plan:
<TABLE>
<CAPTION>
Votes Broker
Votes For Against Abstentions Nonvotes
------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
213,095,919 7,169,378 2,183,504 0
</TABLE>
(d) A stockholder proposal to declassify the Board of Directors (included
in the Company's proxy statement dated April 18, 1997, at the request
of the International Brotherhood of Teamsters General Fund) was not
properly presented for a vote at the meeting and was not voted upon.
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FORM 10-Q
(e) Stockholder Proposal to restore those provisions which allow the
shareholders to ratify the appointment of the independent auditors in
future annual meetings of shareholders; and, that in each proxy
statement for an annual meeting, disclose certain information:
<TABLE>
<CAPTION>
Votes Broker
Votes For Against Abstentions Nonvotes
------------- ----------- ----------- ----------
<S> <C> <C> <C>
7,549,896 188,009,824 2,399,367 24,489,714
</TABLE>
Item 5. Other Information
- --------------------------
On May 22, 1997, 20,842,446 shares of the Company's Common Stock held
by Alscott Limited Partnership #1 were transferred to Kathryn Albertson who then
transferred such shares to the J. A. and Kathryn Albertson Foundation Inc. (the
"Foundation") subject to the terms of an agreement between the Company and the
Foundation dated May 21, 1997 which is included as Exhibit 10.1.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits
<TABLE>
<S> <C>
10.1 J. A. and Kathryn Albertson Foundation Inc. Stock
Agreement (dated May 21, 1997)*
10.1.1 Waiver regarding Alscott Limited Partnership #1 Stock
Agreement (dated May 21, 1997)*
10.1.2 Waiver regarding Kathryn Albertson Stock Agreement
(dated May 21, 1997)*
27 Financial data schedule for the 13 weeks ended May 1,
1997
</TABLE>
* Identifies management contracts or compensatory plans or arrangements
required to be filed as an exhibit hereto.
b. The following reports on Form 8-K were filed during the quarter:
None.
10
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FORM 10-Q
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALBERTSON'S, INC.
---------------------------------
(Registrant)
Date: May 30, 1997 /S/ A. Craig Olson
--------------------- ---------------------------------
A. Craig Olson
Senior Vice President, Finance
and Chief Financial Officer
11
<PAGE> 12
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- --------------------------------
10.1 J. A. and Kathryn Albertson Foundation Inc. Stock
Agreement (dated May 21, 1997)*
10.1.1 Waiver regarding Alscott Limited Partnership #1 Stock
Agreement (dated May 21, 1997)*
10.1.2 Waiver regarding Kathryn Albertson Stock Agreement
(dated May 21, 1997)*
27 Financial data schedule for the 13 weeks ended May 1,
1997
* Identifies management contracts or compensatory plans or arrangements
required to be filed as an exhibit hereto.
<PAGE> 1
Exhibit 10.1
AGREEMENT
This Agreement, made and executed as of May 21, 1997, is between
Albertson's, Inc. and the J.A. and Kathryn Albertson Foundation, Inc. Except
where defined in context, capitalized terms used herein are defined in Article
One.
W I T N E S S E T H:
WHEREAS, the Foundation desires to acquire 20,842,446 shares of Common
Stock (the "Transfer Shares") Beneficially Owned by Alscott Limited Partnership
#1, a Texas limited partnership (the "Partnership"); and
WHEREAS, the Company is willing to waive whatever rights it may have
under certain existing agreements among the Company, members of the Albertson
family and the Partnership relating to such Transfer Shares and to consent to
the transfer thereof to the Foundation, if the Foundation agrees to be bound by
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE ONE
Section 1.1 Definitions. Except as otherwise specified herein, defined
terms used in this Agreement shall have the following respective meanings:
"Additional Election Period" shall have the meaning ascribed to it in
Section 3.1(c).
"Agreement" shall mean this Agreement.
"Beneficially Own" shall have the meaning ascribed to it in Rule 13d-3
under the 1934 Act.
"Business Day" shall mean any day other than a day on which banks are
permitted or required to be closed in New York, New York.
"Closing" shall mean the closing of any purchase of the Offered Shares
by the Company pursuant to Article 3, which shall be held at 10:00
A.M., local time, on the Closing Date at the principal office of the
Company, or at such other time or place as the parties hereto may
mutually agree.
"Closing Date" shall have the meaning ascribed to it in Section 3.1(e).
"Common Stock" shall mean the Common Stock of the Company, par value
$1.00 per share.
"Company" shall mean Albertson's, Inc., a Delaware corporation.
"Company's Notice" shall have the meaning ascribed to it in Section
3.1(b).
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<PAGE> 2
"Control" shall have the meaning ascribed to it in Rule 12b-2 under the
1934 Act.
"Donation" shall have the meaning ascribed to it in Section 3.3.
"Donee's Notice" shall have the meaning ascribed to it in Section 3.3.
"Election Period" shall mean the five Business Days following giving of
the Foundation's Notice.
"Extended Election Period" shall mean the 20 Business Days following
giving of the Foundation's Notice.
"Foundation" shall mean the J.A. and Kathryn Albertson Foundation,
Inc., an Idaho corporation.
"Foundation's Notice" shall have the meaning ascribed to it in Section
3.1(a).
"Group" shall have the meaning ascribed to it in Section 13(d)(3) of
the 1934 Act.
"Market Price" shall mean the average of the daily closing prices per
share of Voting Securities of the same class as the Offered Shares or
the Voting Securities received in the Donation, as the case may be, for
the 30 consecutive Trading Days immediately preceding either the day
that the Foundation's Notice is given pursuant to Section 3.1 or
Section 3.2 or the day on which Beneficial Ownership is transferred to
the donee pursuant to Section 3.3, as the case may be.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Offered Shares" shall mean the Voting Securities proposed to be
transferred by the Foundation, the number of which shall be set forth
in the Foundation's Notice.
"Person" shall mean any individual, partnership, corporation, group,
syndicate, trust, government or agency thereof, or any other
association or entity.
"Purchase Price" shall mean 96% of the Market Price.
"Prohibition Notice" shall have the meaning ascribed to it in Section
3.2(a).
"Term" shall have the meaning ascribed to it in Section 2.1.
"Total Voting Power" shall mean the total combined Voting Power of all
the Voting Securities then outstanding, including, without limitation,
the Common Stock.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Voting Securities are listed or
admitted to trading is open for the transaction of business.
2
<PAGE> 3
"Transfer Shares" shall have the meaning ascribed to it in the recitals
to this Agreement.
"Voting Securities" shall mean any securities entitled to vote
generally in the election of directors of the Company.
"Voting Power" shall mean voting power in the general election of
directors of the Company.
Section 1.2 Calendar Days. Unless otherwise specified, all references
to "days" shall be deemed to be references to calendar days.
ARTICLE TWO
Section 2.1 Term. The term of this Agreement (the "Term") shall
commence on the date hereof and shall continue until the twentieth anniversary
of the date hereof; provided, however, that the Company may, on three occasions,
by notice given to the Foundation at least 10 days prior to the date on which
this Agreement would otherwise expire, extend the Term for an additional
ten-year period, but in no event shall the Term be extended beyond the fiftieth
anniversary of the date hereof without the written consent of the Foundation;
provided, further, that, not withstanding the foregoing, this Agreement shall
terminate for all purposes, may not be extended and shall be of no further force
or effect on the first day that the Foundation does not Beneficially Own any
Voting Securities.
Section 2.2 Automatic Termination. Notwithstanding anything to the
contrary set forth herein, this Agreement shall immediately terminate and be of
no further force or effect whatsoever if Beneficial Ownership of the Transfer
Shares is not vested in the Foundation on or before June 30, 1997.
ARTICLE THREE
Section 3.1 Right of First Refusal.
(a) Subject to the provisions of Section 4.1, if the
Foundation desires to transfer any Voting Securities Beneficially Owned
by it, the Foundation shall give notice (the "Foundation's Notice") to
the Company (i) stating that it desires to make such transfer and (ii)
setting forth the number of Offered Shares. Except as provided in
Section 3.2(b), the Foundation's Notice shall constitute an irrevocable
offer by the Foundation to sell the Offered Shares to the Company.
(b) Except as otherwise provided in this Article 3, the
Company may elect to purchase all (but not less than all) of the
Offered Shares at a price per share equal to the Purchase Price by
giving notice (the "Company's Notice") to the Foundation during the
Election Period, stating the Company's irrevocable acceptance of the
offer set forth in the Foundation's Notice.
(c) If the Company does not give the Company's Notice during
the Election Period, then the Foundation may, for a period of 45 days
immediately following the expiration of the Election Period, sell the
Offered Shares at a price per share at or above the Market Price;
provided, however, that prior to selling (or agreeing to sell) to a
third party any part of the Offered Shares with aggregate Voting Power,
on an issued and outstanding basis, in excess of 1% of the Total Voting
Power, the Foundation shall give the Company notice of the identity of
such
3
<PAGE> 4
third party (and the identity of any known transferee ) and, provided
that the identity of such third party (and such transferee) has not
been disclosed to the Company in the Foundation's Notice, the Company
shall thereupon have three additional Business Days (the "Additional
Election Period") following giving of such notice during which to elect
to purchase such part of the Offered Shares at a price per share equal
to the Purchase Price by giving the Company's Notice.
(d) If the Company does not give the Company's Notice during
the Election Period, any Additional Election Period or the Extended
Election Period, and the Foundation has not sold all of the Offered
Shares prior to the expiration of the 45-day period immediately
following the Election Period or the Extended Election Period, as the
case may be, the right of first refusal under this Section 3.1 shall
again apply to any subsequently proposed transfer of any of the Offered
Shares.
(e) Any purchase of any Offered Shares by the Company pursuant
to this Article 3 shall be completed on a date (the "Closing Date")
designated by the Company in a notice to the Foundation, which date
shall be not more than three Business Days following giving of the
Company's Notice; provided, however, in the event the Company is unable
to obtain financing sufficient to enable it to effect the purchase of
the Offered Shares within three Business Days following giving of the
Company's Notice, the Company may, by giving notice to the Foundation
during such three-Business Day period, postpone the Closing Date to a
date not more than 30 days following giving of the Company's Notice;
provided further that the Company shall pay to the Foundation interest
on the purchase price of the Offered Shares for each day the Closing
Date is postponed beyond the expiration of such three-Business Day
period at a rate of interest per annum equal to the 30-day commercial
paper high-grade unsecured notes sold through dealers by major
corporations rate listed in the Wall Street Journal under the heading
"Money Rates" (or the closest equivalent rate if such rate has ceased
to be published) on the first Business Day with respect to which such
interest is payable.
(f) The Purchase Price for any Offered Shares purchased by the
Company pursuant to this Article 3, including any interest provided for
herein, shall be paid at the Closing by wire transfer of immediately
available funds to an account previously designated by the Foundation.
(g) At the Closing, the Foundation shall deliver to the
Company certificates representing the shares of Voting Securities being
sold, free and clear of any lien, claim or encumbrance, together with
any other documents reasonably necessary to evidence ownership and
authority to complete the transaction.
Section 3.2 Certain Limitations. If the Foundation's Notice is given at
a time when the Company is prohibited by any United States securities law, or
any rule or regulation promulgated thereunder, from purchasing the Offered
Shares the following additional provisions shall apply:
(a) The Company shall give the Foundation notice of such
prohibition (the "Prohibition Notice") during the Election Period, and
the Company may thereafter elect to purchase the Offered Shares by
giving the Company's Notice at any time during the Extended Election
Period. If the Company does not give the Company's Notice during the
Extended Election Period, then the Foundation may, for a period of 45
days immediately following the
4
<PAGE> 5
expiration of the Extended Election Period, sell the Offered Shares at
a price per share at or above the Market Price; provided, however, that
prior to selling (or agreeing to sell) to a third party any part of the
Offered Shares with aggregate Voting Power, on an issued and
outstanding basis, in excess of 1% of the Total Voting Power, the
Foundation shall give the Company notice of the identity of such third
party (and the identity of any known transferee of such third party )
and, provided that the identity of such third party (and such
transferee) has not been disclosed to the Company in the Foundation's
Notice, the Company shall thereupon have the Additional Election Period
following giving of such notice during which to elect to purchase such
part of the Offered Shares at a price per share equal to the Purchase
Price by giving the Company's Notice; or
(b) The Company may, if such prohibition arises under any law,
rule or regulation relating to trading in securities while in the
possession of material non-public information, disclose such
information to the Foundation without the Foundation's consent if, but
only if, the Company has given the Company's Notice during the
applicable period. In the event the Company discloses information
pursuant to this Section 3.2(b), the Foundation shall maintain the
confidentiality of such information, and the Foundation may revoke the
Foundation's Notice by written notice to the Company given within five
Business Days following the disclosure of such information by the
Company to the Foundation. If the Foundation does not elect to revoke
the Foundation's Notice as provided in the preceding sentence, the
Company shall be obligated to purchase all (but not less than all) of
the Offered Shares in accordance with the Company's Notice, and, if
such purchase is not completed, the Foundation shall have, in addition
to any other legal or equitable remedy that may be available to it, the
right of specific performance, as provided in Section 6.1(a) hereof.
Section 3.3 Charitable Donations. Notwithstanding the limitation on
transfer set forth in Section 3.1, in each calendar year during the Term the
Foundation may make a charitable donation (a "Donation") in the form of Voting
Securities of up to 5% of the total number of Voting Securities Beneficially
Owned by the Foundation at the time of any Donation, provided that the donee has
theretofore agreed (i) to offer to sell to the Company immediately, by written
notice to the Company to be given within three days following receipt of the
Donation (the "Donee's Notice"), all of the Voting Securities received in such
Donation at a price per share equal to the Purchase Price and, if the Company
accepts the offer set forth in the Donee's Notice by written notice to the donee
within five Business Days following giving of the Donee's Notice, to be bound by
the obligations of the Foundation under Section 3.1(g) and by this Section 3.3
with respect to the closing of such transaction and (ii) if the Company does not
accept the offer set forth in the Donee's Notice by written notice to the donee
during such five-Business Day period, to sell all of such Voting Securities on
the open market within 30 days following receipt of the Donation. If the Company
accepts the offer set forth in the Donee's Notice during such five-Business Day
period, the Company shall designate a closing date, time and place with respect
to such transaction in writing to the donee and, on such designated closing
date, pay to the donee the Purchase Price for all of the Voting Securities
received in the Donation by wire transfer of immediately available funds to an
account previously designated by the donee.
Section 3.4 Designation of Purchaser. If the Company elects to exercise
a right of first refusal under this Article 3, the Company may specify in the
Company's Notice (or at any time thereafter which is prior to the purchase of
the Offered Shares to which such notice relates) another Person as its designee
to purchase such Offered Shares in accordance with the terms and provisions of
this Agreement. No such
5
<PAGE> 6
designation shall extend any of the time periods specified herein or change any
other term or provision hereof.
ARTICLE FOUR
Section 4.1 Covenants. During the Term the Foundation shall not, and
shall use its best efforts to cause each Person Controlled by it not to, singly
or as part of a Group, directly or indirectly:
(a) acquire, offer to acquire, or agree to acquire, by
purchase, gift or otherwise, Beneficial Ownership of any Voting
Securities, except (i) the Transfer Shares, (ii) pursuant to a stock
split, stock dividend, rights offering, recapitalization,
reclassification or similar transaction and (ii) for acquisitions that
would not cause the aggregate Voting Power of the Voting Securities, on
an issued and outstanding basis, Beneficially Owned by the Foundation
to exceed 15% of the Total Voting Power;
(b) join or form a Group for the purpose of acquiring,
holding, voting or disposing of any Voting Securities;
(c) deposit any Voting Securities into a voting trust or
subject any Voting Securities to any arrangement or agreement with
respect to the voting thereof; or
(d) pledge, hypothecate or otherwise encumber any Voting
Securities, except as security for any loan the entire proceeds of
which are used to make required distributions under Section 4942 of the
Internal Revenue Code of 1986, as amended, and then only if the pledgee
has theretofore agreed, pursuant to an instrument in form and substance
satisfactory to the Company, to be bound by all of the terms and
provisions of this Agreement to the same extent the Foundation is bound
hereby.
Section 4.2 Affirmative Covenants. Not withstanding any other term or
provision of this Agreement to the contrary, during the Term the Foundation
shall:
(a) comply with all applicable laws, rules and regulations
relating to trading in securities while in the possession of material
non-public information; and
(b) retain the name "Albertson" as part of its name, maintain
its status as a charitable entity and associate the name "Albertson"
with all charitable activities undertaken or otherwise participated in
by the Foundation.
ARTICLE FIVE
Section 5.1 Representations and Warranties of the Company. The Company
represents and warrants to the Foundation as follows:
6
<PAGE> 7
(a) The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated by this Agreement are within the corporate powers of the
Company and have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms (i) except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers, and (ii)
subject to the limitations imposed by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding at law or in equity).
(b) The execution, delivery and performance of this Agreement
by the Company do not and will not contravene or conflict with or
constitute a default under the Company's Restated Certificate of
Incorporation or by-laws.
Section 5.2 Representations and Warranties of the Foundation. The
Foundation represents and warrants to the Company as follows:
(a) The execution, delivery and performance by the Foundation
of this Agreement and the consummation by the Foundation of the
transactions contemplated by this Agreement are within the corporate
powers of the Foundation and have been duly authorized by all necessary
corporate action on the part of the Foundation. This Agreement
constitutes a legal, valid and binding agreement of the Foundation
enforceable against the Foundation in accordance with its terms (i)
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and
preferential transfers, and (ii) subject to the limitations imposed by
general equitable principles (regardless of whether such enforceability
is considered in a proceeding at law or in equity).
(b) The execution, delivery and performance of this Agreement
by the Foundation do not and will not contravene or conflict with or
constitute a default under the Foundation's charter or by-laws.
ARTICLE SIX
Section 6.1 Enforcement; Consent to Jurisdiction.
(a) The Foundation and the Company acknowledge and agree that
irreparable damage would occur if any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, the parties hereto agree that
each party will be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the provisions
hereof, this being in addition to any other remedy to which either
party may be entitled at law or in equity.
(b) The Company and the Foundation each irrevocably agrees
that any legal action or proceeding to enforce this Agreement, or any
claim or dispute arising out of or in connection
7
<PAGE> 8
with, or in any way relating to, this Agreement or any transaction
contemplated by this Agreement, shall be brought in the courts of the
State of Idaho. By execution and delivery of this Agreement, the
Company and the Foundation each irrevocably consents to submit itself
to the jurisdiction of each such court and irrevocably designates,
appoints and empowers the Secretary of State of the State of Idaho to
receive for and on its behalf service of process in the State of Idaho.
Section 6.2 No Waiver. Any waiver by either party hereto of any breach
of any provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of either party hereto to insist upon
strict adherence to any term of this Agreement on one or more occasions shall
not be considered a waiver or deprive such party of the right thereafter to
insist upon strict adherence to such term or any other term of this Agreement.
Section 6.3 Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and may be amended only by an agreement in writing executed by
each of the parties hereto.
Section 6.4 Severability. If any provision of this Agreement is held by
a court of competent jurisdiction to be unenforceable, the remaining provisions
shall remain in full force and effect. It is declared to be the intention of the
parties hereto that they would have executed the remaining provisions without
including any provision that may be declared unenforceable.
Section 6.5 Headings. Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement.
Section 6.6 Counterparts. For the convenience of the parties hereto,
any number of counterparts of this Agreement may be executed by the parties, and
each such executed counterpart shall be deemed an original instrument.
Section 6.7 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be made in writing by
hand-delivery or by courier guaranteeing overnight delivery in accordance with
the following:
(a) If to the Company, to:
Thomas R. Saldin
Executive Vice President, Administration
and General Counsel
Albertson's, Inc.
250 East Parkcenter Boulevard
Boise, Idaho 83706
8
<PAGE> 9
with a copy to:
Kaye L. O'Riordan
Corporate Secretary and Senior Attorney
Albertson's, Inc.
250 East Parkcenter Boulevard
Boise, Idaho 83706
or to such other person or address as the Company will furnish to the
Foundation in writing.
(b) If to the Foundation, to:
J.A. and Kathryn Albertson Foundation, Inc.
Suite 100
380 East Parkcenter Boulevard
Boise, Idaho 83706
Attention: Thomas J. Wilford
or to such other person or address as the Foundation will furnish to
the Company in writing.
(c) All notices, requests, demands and other communications
given in accordance with this Section 6.7 shall be deemed to have been
given for all purposes of this Agreement at the time of delivery by
hand to the relevant office, if personally delivered, and on the next
Business Day, if timely delivered to a courier guaranteeing overnight
delivery.
Section 6.8 Successors and Assigns. This Agreement shall bind the
successors and assigns of the parties hereto, and inure to the benefit of any
successor or permitted assign of either of them; provided, however, that no
party may assign this Agreement without the prior written consent of the other
party hereto, except that the Company may assign certain of its rights hereunder
in accordance with Section 3.4.
Section 6.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Idaho without giving effect to the conflict of laws principles thereof.
Section 6.10 Legend.
(a) The share certificates evidencing Voting Securities
Beneficially Owned by the Foundation during the Term shall bear the
following legend until such time as such shares are free of the
restrictions contained in this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF AN AGREEMENT, DATED AS OF ________], 1997,
BETWEEN ALBERTSON'S, INC. AND THE J.A. AND KATHRYN ALBERTSON
FOUNDATION AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SAID AGREEMENT IS ON FILE AT
9
<PAGE> 10
THE OFFICE OF THE CORPORATE SECRETARY OF ALBERTSON'S, INC.
(b) The Foundation shall promptly present or cause to be
presented to the Company all certificates representing shares Voting
Securities now owned or hereafter acquired by the Foundation for the
placement thereon of the legend provided for in this Section 6.10. The
Company may enter a stop-transfer order with any transfer agent of the
Voting Securities against transfer of such securities except in
compliance with this Agreement. All legends and stop-transfer orders
shall be removed with respect to any shares of Voting Securities that
are sold, transferred or otherwise disposed of in accordance with the
terms of this Agreement.
Section 6.11 Non-Affected Shares. Notwithstanding any term or provision
of this Agreement to the contrary, the parties hereto acknowledge and agree that
the Foundation presently Beneficially Owns 1,180,000 shares of Common Stock (the
"Non-Affected Shares") and that no term or provision of this Agreement shall
apply to the Non-Affected Shares or to any Voting Securities acquired or issued
with respect to such Non-Affected Shares pursuant to any dividend reinvestment
plan or any stock split, stock or other dividend, rights offering,
recapitalization, reclassification or similar transaction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first referred
to above.
Albertson's, Inc.
By: GARY G. MICHAEL
-----------------
Name: Gary G. Michael
Title: Chairman of the Board and
Chief Executive Officer
J.A. and Kathryn Albertson
Foundation, Inc.
By: J.B. SCOTT
------------
Name: J. B. Scott
Title: President
10
<PAGE> 1
Exhibit 10.1.1
May 21, 1997
Alscott Limited Partnership #1
280 E. Parkcenter Blvd., Ste. 100
Boise, ID 83706
Attn: Thomas J. Wilford
RE: Transfer of 20,842,446 Shares of Albertson's, Inc. Common
Stock (the "Stock") to the J.A. and Kathryn Albertson
Foundation, Inc.
Dear Mr. Wilford:
The purpose of this letter is to state that Albertson's, Inc. will not
require compliance by Alscott Limited Partnership #1 (the "Limited Partnership")
with the terms of Section 3.2 of the Agreement between the Limited Partnership
and Albertson's dated February 2, 1996 (the "Agreement") in connection with the
transfer of 20,842,446 shares of Stock to the J.A. and Kathryn Albertson
Foundation, Inc.
Sincerely,
ALBERTSON'S, INC.
GARY G. MICHAEL
Gary G. Michael
Chairman of the Board and
Chief Executive Officer
GGM:dmd
<PAGE> 1
Exhibit 10.1.2
May 21, 1997
Mrs. Kathryn Albertson
380 E. Parkcenter Blvd., Ste. 100
Boise, ID 83706
RE: Transfer of 20,842,446 Shares of Albertson's, Inc. Common
Stock (the "Stock") to the J.A. and Kathryn Albertson
Foundation, Inc.
Dear Mrs. Albertson:
The purpose of this letter is to state that Albertson's, Inc. will not
require compliance by you with the terms of Section 3.2 of the Agreement between
you and Albertson's dated December 31, 1979 (the "Agreement") in connection with
the transfer of 20,842,446 shares of Stock to the J.A. and Kathryn Albertson
Foundation, Inc.
Sincerely,
ALBERTSON'S, INC.
GARY G. MICHAEL
Gary G. Michael
Chairman of the Board and
Chief Executive Officer
GGM:dmd
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALBERTSON'S
QUARTERLY REPORTS TO STOCKHOLDERS FOR THE 13 WEEKS ENDED MAY 1, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-1998
<PERIOD-START> JAN-31-1997
<PERIOD-END> MAY-01-1997
<CASH> 50,353
<SECURITIES> 0
<RECEIVABLES> 102,309
<ALLOWANCES> 1,000
<INVENTORY> 1,151,822
<CURRENT-ASSETS> 1,397,828
<PP&E> 4,742,978
<DEPRECIATION> 1,629,392
<TOTAL-ASSETS> 4,689,856
<CURRENT-LIABILITIES> 1,242,001
<BONDS> 784,813
0
0
<COMMON> 250,133
<OTHER-SE> 2,046,525
<TOTAL-LIABILITY-AND-EQUITY> 4,689,856
<SALES> 3,607,541
<TOTAL-REVENUES> 3,607,541
<CGS> 2,678,835
<TOTAL-COSTS> 2,678,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,314
<INCOME-PRETAX> 177,093
<INCOME-TAX> 67,827
<INCOME-CONTINUING> 109,266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,266
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
