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 January 29, 1998 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) 395-6200
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, 245,778,957 New York Stock Exchange
shares outstanding on March 27, 1998 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 27, 1998: $9,448,475,914.
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
January 29, 1998, 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 22, 1998,(the "Proxy
Statement") to be filed within 120 days after the Registrant's fiscal year
ended January 29, 1998, portions of which are incorporated by reference
into Part III of this Form 10-K.
1
<PAGE>
Documents Incorporated by Reference
-----------------------------------
<TABLE>
<S> <C>
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 January 29, 1998
Item 6 - Selected Financial Data Page 44 of the Annual Report to
Stockholders for the year ended
January 29, 1998
Item 7 - Management's Discussion and Pages 19 to 22 of the Annual
Analysis of Financial Report to Stockholders for the
Condition and Results of year ended January 29, 1998
Operations
Item 8 - Financial Statements and Pages 23 to 43 and page 45 of the
Supplementary Data Annual Report to Stockholders for
the year ended January 29, 1998
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," "Continuing Class I
Directors," "Continuing Class II
Directors" and "Section 16(a)
Beneficial Ownership Reporting
Compliance" in the Proxy Statement
Item 11 - Executive Compensation The material contained under the
headings "Summary Compensation
Table," "Option Grants in Last
Fiscal Year," "Aggregated Option
Exercises in Last Fiscal Year and
Fiscal Year-End Option Values" 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 23 to 43 and page 45 of the
Statement Schedules and Annual Report to Stockholders for
Reports on Form 8-K the year ended January 29, 1998
</TABLE>
2
<PAGE>
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 8
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
7A. Quantitative and Qualitative Disclosures about
Market Risk 9
8. Financial Statements and Supplementary Data 9
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 9
PART III
10. Directors and Executive Officers of the Registrant 9
11. Executive Compensation 12
12. Security Ownership of Certain Beneficial Owners
and Management 12
13. Certain Relationships and Related Transactions 12
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 12
</TABLE>
3
<PAGE>
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 one of the largest retail food-drug chains
in the United States. As of January 29, 1998, the Company operated 878 stores in
20 Western, Midwestern and Southern states. These stores consist of 768
combination food-drug stores, 72 conventional supermarkets and 38 warehouse
stores. Retail operations are supported by 11 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 82,000 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, liquor and floral. Some also offer
meal centers, party pavilions, coffee bars and destination departments for
beverages, snacks, pet care, paper products and baby care. Food and nonfood
shopping areas are served by a common set of checkstands.
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 non-food lines. Many locations have an
in-store bakery and a 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.
In fiscal 1997 the Company opened its first fuel center. The Company plans to
continue to add fuel centers near existing stores. These centers feature three
to six fuel pumps and a small building, ranging in size from a pay-only kiosk to
a small convenience store featuring such items as candy, soft drinks and snack
foods.
The Company's retail operations are organized into regions with each region
comprised of four or 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 who oversee the operations of 19 stores on average and
merchandising specialists in areas such as grocery, produce, pharmacy, liquor,
general merchandise, bakery, meat and service delicatessen. Merchandising
specialists serve as advisors to help maintain adherence to overall division
pricing and merchandising policies. Each store has a store director responsible
for overall store operations and a front-end manager responsible for service
levels and efficiencies in the stores' checkstand operations.
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 local, regional and national supermarket chains,
supercenters, club stores, specialty retailers such as pet centers and toy
stores and large-scale drug and pharmaceutical retailers. Increasing competition
also exists from convenience stores, prepared food retailers, liquor and video
stores, film developing outlets and Internet and mail-order retailers.
4
<PAGE>
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.
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 provide consumer information such as: nutritional signing in the meat and
produce departments, freshness code dating, unit pricing, meal ideas 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 January 29, 1998, the Company employed approximately 94,000 people,
many of which are covered by collective bargaining agreements. The Company
considers its present relations with employees to be good.
Albertson's stores are located in 20 Western, Midwestern and Southern areas
of the United States. The following is a summary of the stores by state as of
January 29, 1998:
<TABLE>
<CAPTION>
Albertson's Retail Stores
-------------------------
<S> <C>
Arizona 37
Arkansas 1
California 176
Colorado 50
Florida 102
Idaho 33
Kansas 6
Louisiana 19
Mississippi 3
Montana 8
Nebraska 8
Nevada 28
New Mexico 21
Oklahoma 24
Oregon 48
South Dakota 1
Texas 187
Utah 39
Washington 78
Wyoming 9
---
878
===
</TABLE>
Item 2. Properties
- -------------------
The Company has actively pursued an expansion program of adding new retail
stores, enlarging and remodeling existing stores and replacing smaller stores.
During the past ten years, the Company has built or acquired 543 stores and
approximately 95% of the Company's current retail square footage has been opened
or remodeled during this 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 all leases contain renewal options which allow the Company
the right to extend the lease for varying additional periods.
5
<PAGE>
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's future expansion plans are
expected to be financed primarily from cash provided by operating activities.
The Company will continue to finance a portion of its new stores through lease
transactions when it does not have the option to own the property.
As of January 29, 1998, the Company operated 878 stores in the states
discussed in Item 1. An analysis of stores listed by division is as follows:
<TABLE>
<CAPTION>
Number
of Stores
---------
<S> <C>
Idaho (Southern Idaho (30), Northern Nevada (10),
Eastern Oregon (4) and Wyoming (1)) 45
Inland Empire (Eastern Washington (18),
Montana (8) and Northern Idaho (3)) 29
Utah (Utah (39) and Wyoming (1)) 40
Western Washington 55
Oregon (Western Oregon (44) and Washington (5)) 49
Southern California (California (128) and
Southern Nevada (18)) 146
Northern California 47
Rocky Mountain (Colorado (50), Wyoming (7),
New Mexico (1) and South Dakota (1)) 59
Southwest (Arizona (37), New Mexico (20), Texas (4)
and California (1)) 62
Midwest (Oklahoma (24), Nebraska (8) and Kansas (6)) 38
Houston (Texas (29), Louisiana (16) and Mississippi (3)) 48
San Antonio (Texas (44)) 44
Dallas/Ft. Worth (Texas (110), Louisiana (3) and
Arkansas (1)) 114
Florida 102
---
878
===
</TABLE>
The following is a summary of stores, by classification, as of the indicated
fiscal year end:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Combination Food-Drug 768 715 646 588 536
Conventional Stores 72 72 78 88 96
Warehouse Stores 38 39 40 44 44
--- --- --- --- ---
878 826 764 720 676
=== === === === ===
</TABLE>
The following table summarizes the Company's retail square footage by store
type as of the indicated fiscal year end (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Combination Food-Drug 38,904 35,886 32,217 29,217 26,602
Conventional Stores 2,105 2,113 2,261 2,524 2,741
Warehouse Stores 1,792 1,841 1,881 2,037 2,031
------ ------ ------ ------ ------
42,801 39,840 36,359 33,778 31,374
====== ====== ====== ====== ======
</TABLE>
The Company has expanded and improved its distribution facilities when
opportunities exist to improve service to the retail stores and generate an
adequate return on investment. During 1997 approximately 77% of the merchandise
purchased for resale in Company retail stores was received from Company-owned
distribution centers.
6
<PAGE>
Albertson's distribution system consists of 11 Company-owned centers located
strategically throughout the Company's operating markets. The following is a
summary of the Company's distribution and manufacturing facilities as of January
29, 1998:
<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,
Meat and Deli 1,018,000
Central Bakery 41,000
Plant City, Florida
Groceries, Frozen Food, Produce, Liquor, Meat,
Deli and high-volume Health and Beauty Care 979,000
Portland, Oregon
Groceries, Frozen Food, Produce, Meat and Deli 790,000
Houston, Texas
Groceries, Frozen Food, Produce, Meat and Deli 698,000
Phoenix, Arizona
Groceries, Frozen Food, Produce, Liquor, Meat,
Deli and high-volume Health and Beauty Care 687,000
Salt Lake City, Utah
Groceries, Frozen Food, Produce, Meat and Deli 647,000
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
Denver, Colorado
Groceries, Frozen Food, Produce, Meat and Deli 355,000
Boise, Idaho
Health and Beauty Care and General Merchandise 238,000
Ice Cream Plant 11,000
---------
7,404,000
=========
</TABLE>
As of January 29, 1998, the Company held title to the land and buildings of
52% of the Company's stores and held title to the buildings on leased land of an
additional 10% of the Company's stores. The Company also holds title to the land
and buildings of the Company's corporate headquarters in Boise, Idaho, 8
division offices and all of the distribution facilities.
Item 3. Legal Proceedings
- --------------------------
Three civil lawsuits filed in September 1996 as purported statewide class
actions in Washington, California and Florida and two civil lawsuits filed in
April 1997 in federal court in Boise, Idaho, as purported multi-state class
actions (including the remaining states in which the Company operated at the
time) have been brought against the Company raising various issues that include:
(i) allegations that the Company has a widespread practice of permitting its
employees to work "off-the-clock" without being paid for their work and (ii)
allegations that the Company's bonus and workers' compensation plans are
unlawful. Four of these suits are being sponsored and financed by the United
Food and Commercial Workers (UFCW) International Union. The five suits have been
consolidated in Boise, Idaho. In addition, three other similar suits have been
filed as purported class actions in Colorado, New Mexico and Nevada which, in
effect, duplicate the coverage of the UFCW-sponsored suits. These cases may
ultimately be transferred to, or consolidated with, the pending Boise
litigation.
7
<PAGE>
The Company is committed to full compliance with all applicable laws.
Consistent with this commitment, the Company has firm and long-standing policies
in place prohibiting off-the-clock work and has structured its bonus and
workers' compensation plans to comply with applicable law. The Company 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. The Company intends to
vigorously defend against all of these lawsuits, and, at this stage of the
litigation, the Company believes that it has strong defenses against them.
Although these lawsuits are subject to the uncertainties inherent in the
litigation process, based on the information presently available to the Company,
management does not expect the ultimate resolution of these actions to have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
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,
results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted during the fourth quarter of 1997 to a vote of
security holders through the solicitation of proxies or otherwise.
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 captions "Company Stock
Information" and "Stockholders of Record" on the inside back cover of the
Company's 1997 Annual Report to Stockholders. This information is incorporated
herein by this reference thereto. The market value of the Company's common stock
on March 27, 1998, was $51.0625 per share.
Item 6. Selected Financial Data
- --------------------------------
Selected financial data of the Company for the fiscal years 1993 through 1997
is included under the caption "Five Year Summary of Selected Financial Data"
on page 44 of the Company's 1997 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
"Financial Review" on pages 19 to 22 of the Company's 1997 Annual Report to
Stockholders. This information is incorporated herein by this reference thereto.
8
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
The Company is exposed to certain market risks which are inherent in the
Company's financial instruments which arise from transactions entered into in
the normal course of business. Although the Company currently utilizes no
material derivative financial instruments which expose the Company to
significant market risk, the Company is exposed to cash flow and fair value risk
due to changes in interest rates with respect to its long-term debt borrowings.
The Company is subject to interest rate risk on its long-term fixed interest
rate debt borrowings. Commercial paper borrowings do not give rise to
significant interest rate risk because these borrowings have maturities of less
than three months. All things being equal, the fair value of debt with a fixed
interest rate will increase as interest rates fall, and the fair value will
decrease as interest rates rise. The Company manages its exposure to interest
rate risk by utilizing a combination of fixed rate borrowings and commercial
paper borrowings.
The table below presents principal cash flows and related weighted average
interest rates of the Company's long-term debt borrowings (excluding commercial
paper) at January 29, 1998 by expected maturity dates (in millions):
<TABLE>
<CAPTION>
There- Fair
1998 1999 2000 2001 2002 after Total Value
----- ---- ------ ---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt $86.5 $1.1 $290.9 $1.5 $1.7 $411.2 $792.9 $833.8
Weighted average
interest rate 5.71% 8.73% 6.31% 9.08% 9.34% 7.28% 6.77%
</TABLE>
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 23 to 43 and page 45 of the
Company's 1997 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.
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," "Continuing Class I Directors," "Continuing Class II
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive proxy statement for use in connection with the 1998 Annual
Meeting of Stockholders (the "Proxy Statement") to be filed within 120 days
after the Company's fiscal year ended January 29, 1998, and is incorporated
herein by this reference thereto.
9
<PAGE>
Executive Officers
- ------------------
<TABLE>
<CAPTION>
Age Date First Appointed
as of as an Executive
Name 3/27/98 Position Officer
---- ------- -------- --------------------
<S> <C> <C> <C>
Gary G. Michael 57 Chairman of the Board and 12/02/74
Chief Executive Officer
John B. Carley 64 Chairman of the Executive 04/05/76
Committee of the Board
Richard L. King 48 President and Chief Operating 01/01/94
Officer
Carl W. Pennington 60 Executive Vice President, 08/02/87
Corporate Merchandising
Michael F. Reuling 51 Executive Vice President, 12/30/79
Store Development
Thomas R. Saldin 51 Executive Vice President, 12/26/83
Administration and
General Counsel
Ronald D. Walk 54 Executive Vice President, 05/28/84
Retail Operations
Thomas E. Brother 56 Senior Vice President, 07/30/89
Distribution
William H. Emmons 48 Senior Vice President and 02/02/96
Regional Manager
Dennis C. Lucas 50 Senior Vice President and 02/02/96
Regional Manager
A. Craig Olson 46 Senior Vice President, Finance 12/22/86
and Chief Financial Officer
David G. Simonson 51 Senior Vice President and 02/02/96
Regional Manager
Patrick S. Steele 48 Senior Vice President, 06/10/90
Information Systems and
Technology
Steven D. Young 49 Senior Vice President, Human 12/02/91
Resources
Robert K. Banks 48 Group Vice President, 12/02/96
Real Estate
David G. Dean 47 Group Vice President, 12/02/91
Procurement
Peggy Jo Jones 45 Group Vice President, Employee 11/29/93
Development and Communications
Richard J. Navarro 45 Group Vice President and 11/29/93
Controller
</TABLE>
10
<PAGE>
Gary G. Michael has served as Chairman of the Board and Chief Executive
Officer since 1991.
John B. Carley became Chairman of the Executive Committee of the Board on
February 2, 1996. Previously he served as President and Chief Operating Officer
from 1991.
Richard L. King was promoted to President and Chief Operating Officer on
February 2, 1996. Previously he served as Senior Vice President and Regional
Manager from November 1994; Group Vice President, Merchandising from January
1994; and Vice President, Rocky Mountain Division from 1992.
Carl W. Pennington was promoted to Executive Vice President, Corporate
Merchandising on February 2, 1996. Previously he served as Senior Vice
President, Corporate Merchandising from 1994 and Senior Vice President and
Regional Manager from 1988.
Michael F. Reuling has served as Executive Vice President, Store
Development since 1986.
Thomas R. Saldin has served as Executive Vice President, Administration and
General Counsel since 1991.
Ronald D. Walk was promoted to Executive Vice President, Retail Operations
on February 2, 1996. Previously he served as Senior Vice President and Regional
Manager from 1984.
Thomas E. Brother has served as Senior Vice President, Distribution since
1991.
William H. Emmons was promoted to Senior Vice President and Regional
Manager on February 2, 1996. Previously he served as Vice President, North Texas
Division from 1993 and Vice President, Texas Division from 1988.
Dennis C. Lucas was promoted to Senior Vice President and Regional Manager
on February 2, 1996. Previously he served as Vice President, Oregon Division
from 1995; Vice President, Midwest Division from 1993; Division Manager, Midwest
Division from July 1992; and Director of Operations, Southern California
Division from February 1992.
A. Craig Olson has served as Senior Vice President, Finance and Chief
Financial Officer since 1991.
David G. Simonson was promoted to Senior Vice President and Regional
Manager on February 2, 1996. Previously he served as Vice President, Southern
California Division from 1991.
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.
Steven D. Young was promoted to Senior Vice President, Human Resources in
1993. Previously he served as Group Vice President, Human Resources from 1991.
Robert K. Banks was promoted to Group Vice President, Real Estate on
December 2, 1996. Previously he served as Vice President, Real Estate from 1990.
David G. Dean has served as Group Vice President, Procurement since 1991.
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; and Vice President,
Retail Accounting from 1992.
11
<PAGE>
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," "Option Grants in Last Fiscal Year," "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values" 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.
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 23 to
43 of the Company's Annual Report to Stockholders for the year ended
January 29, 1998:
Consolidated Earnings -- years ended January 29, 1998; January 30,
1997; February 1, 1996.
Consolidated Balance Sheets -- January 29, 1998; January 30, 1997;
February 1, 1996.
Consolidated Cash Flows -- years ended January 29, 1998; January
30, 1997; February 1, 1996.
Consolidated Stockholders' Equity -- years ended January 29, 1998;
January 30, 1997; February 1, 1996.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
12
<PAGE>
Quarterly Financial Data:
Quarterly Financial Data for the years ended January 29, 1998 and
January 30, 1997 is set forth on page 45 of the Annual Report to
Stockholders for the year ended January 29, 1998, 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 17 hereof.
(b) Reports on Form 8-K:
There were no reports on Form 8-K during the quarter ended January
29, 1998.
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. 2-80776,
33-2139, 33-7901, 33-15062, 33-43635, 33-62799 and 33-59803.
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.
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.
13
<PAGE>
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 (including
environmental matters), labor negotiations, adverse effects of failure to
achieve Year 2000 compliance, the Company's ability to recruit and develop
employees, its ability to develop new stores or complete remodels as rapidly as
planned, its ability to successfully implement new technology 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. The Company does not undertake to update forward-looking
information contained herein or elsewhere to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
information.
14
<PAGE>
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)
15
<PAGE>
Date: April 9, 1998
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 9, 1998.
<TABLE>
<S> <C>
GARY G. MICHAEL JOHN B. CARLEY
- --------------------------------- --------------------------------
Gary G. Michael John B. Carley
(Chairman of the Board and (Chairman of the Executive
Chief Executive Officer and Committee of the Board and
Director) Director)
A. CRAIG OLSON RICHARD J. NAVARRO
- --------------------------------- --------------------------------
A. Craig Olson Richard J. Navarro
(Senior Vice President, Finance (Group Vice President and
and Chief Financial Officer) Controller)
(Chief Accounting Officer)
KATHRYN ALBERTSON A. GARY AMES
- --------------------------------- --------------------------------
Kathryn Albertson A. Gary Ames
(Director) (Director)
CECIL D. ANDRUS PAUL I. CORDDRY
- -------------------------------- --------------------------------
Cecil D. Andrus Paul I. Corddry
(Director) (Director)
JOHN B. FERY CLARK A. JOHNSON
- -------------------------------- --------------------------------
John B. Fery Clark A. Johnson
(Director) (Director)
CHARLES D. LEIN WARREN E. McCAIN
- --------------------------------- --------------------------------
Charles D. Lein Warren E. McCain
(Director) (Director)
BEATRIZ RIVERA J. B. SCOTT
- --------------------------------- --------------------------------
Beatriz Rivera J. B. Scott
(Director) (Director)
THOMAS L. STEVENS, JR. WILL M. STOREY
- --------------------------------- --------------------------------
Thomas L. Stevens, Jr. Will M. Storey
(Director) (Director)
STEVEN D. SYMMS
- ---------------------------------
Steven D. Symms
(Director)
</TABLE>
16
<PAGE>
Index to Exhibits
Filed with the Annual Report
on Form 10-K for the
Year Ended January 29, 1998
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
2 Inapplicable
3.1 Restated Certificate of Incorporation(1)
3.1.1 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock(2)
3.2 By-Laws dated December 2, 1996(3)
4.1 Stockholder Rights Plan Agreement(4)
4.2 Indenture, dated as of May 1, 1992, between Albertson's, Inc., and
Morgan Guaranty Trust Company of New York as Trustee(5)
9 Inapplicable
10.1 J. A. and Kathryn Albertson Foundation Inc. Stock Agreement
(dated May 21, 1997)(6)*
10.1.1 Waiver regarding Alscott Limited Partnership #1 Stock
Agreement (dated May 21, 1997)(6)*
10.1.2 Waiver regarding Kathryn Albertson Stock Agreement (dated
May 21, 1997)(6)*
10.5 Form of Beneficiary Agreement for Key Executive Life Insurance(7)*
10.6 Executive Deferred Compensation Plan (amended and restated
February 1, 1989)(8)*
10.6.1 Amendment to Executive Deferred Compensation Plan (dated
December 4, 1989)(9)*
10.7 Senior Operations Executive Officer Bonus Plan(2)*
10.9 Description of Bonus Incentive Plans (amended December 3,
1984)(10)*
10.10 Agreement Among Albertson's, Inc., Theo Albrecht Stiftung and
Theo Albrecht dated as of February 15, 1980(11)
10.10.1 Letter Amendment of October 13, 1982 regarding Exhibit 10.10(12)
10.10.2 First Amendment dated April 11, 1984 to Agreement among
Albertson's, Inc., Theo Albrecht Stiftung and Theo Albrecht(13)
10.10.3 Second Amendment dated September 25, 1989 to Agreement among
Albertson's, Inc., Markus Stiftung and Theo Albrecht(9)
10.10.4 Third Amendment dated December 5, 1994 to Agreement among
Albertson's, Inc., Markus Stiftung and Theo Albrecht(14)
10.11 1982 Incentive Stock Option Plan (amended March 4, 1991)(15)*
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
10.12 Form of 1982 Incentive Stock Option Agreement (amended
November 30, 1987)(16)*
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)(17)*
10.13 Executive Pension Makeup Plan (amended and restated February 1,
1989)(8)*
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)(14)*
10.13.5 Amendment to Executive Pension Makeup Plan (retroactive to January 1,
1990)(21)*
10.14 Credit Agreement (dated October 5, 1994)(22)
10.14.1 Amendment No. 1 to Credit Agreement (dated October 25, 1995)(23)
10.14.2 Amended and Restated Credit Agreement (dated December 17, 1996)(2)
10.15 Senior Executive Deferred Compensation Plan (amended and
restated February 1, 1989)(8)*
10.15.1 Amendment to Senior Executive Deferred Compensation Plan (dated
December 4, 1989)(9)*
10.16 1986 Nonqualified Stock Option Plan (amended March 4, 1991)(15)*
10.17 Form of 1986 Nonqualified Stock Option Plan Stock Option Agreement
(amended November 30, 1987)(16)
10.18 Executive Pension Makeup Trust (dated February 1, 1989)(8)*
10.19 Executive Deferred Compensation Trust (dated February 1, 1989)(8)*
10.20 1990 Deferred Compensation Plan(15)*
10.20.1 Amendment to 1990 Deferred Compensation Plan (dated April 12,
1994)(24)*
10.20.2 Amendment to 1990 Deferred Compensation Plan (dated November 5,
1997)*
10.21 Non-Employee Directors' Deferred Compensation Plan(15)*
10.22 1990 Deferred Compensation Trust (dated November 20, 1990)(15)*
10.23 Letter Agreement with John B. Carley (dated December 4, 1995)(21)*
10.24 1995 Stock-Based Incentive Plan (dated May 26, 1995)(25)*
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
10.24.1 Form of 1995 Stock-Based Incentive Plan Stock Option Agreement
(dated December 4, 1995)(21)*
10.25 1995 Stock Option Plan for Non-Employee Directors (dated
May 26, 1995)(25)*
10.25.1 Form of 1995 Stock Option Plan for Non-Employee Directors Agreement
(dated May 30, 1995)(25)*
11 Inapplicable
12 Inapplicable
13 Exhibit 13 consists of pages 19 to 45 and the inside back cover of
Albertson's, Inc. 1997 Annual Report to Stockholders which are
numbered as pages 1 to 28 of Exhibit 13. Such report, except to the
extent incorporated herein 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 28; Item 6--page 26;
Item 7--pages 1 through 4; and Items 8 and 14--pages 5 through 25 and
page 27.
16 Inapplicable
18 Inapplicable
21 Inapplicable
22 Inapplicable
23 Independent Auditors' Consent
24 Inapplicable
27 Financial Data Schedule - Fiscal Year 1997
27.1 Restated Financial Data Schedule - Quarters 1, 2 and 3 of 1997
27.2 Restated Financial Data Schedule - Fiscal Year and Quarters 1, 2 and
3 of 1996
27.3 Restated Financial Data Schedule - Fiscal Year 1995
99.1 Agreement and Plan of Merger among Albertson's, Inc., Locomotive
Acquisition Corp. and Buttrey Food and Drug Stores Company (dated as
of January 19, 1998)(26)
99.2 Tender and Option Agreement (dated as of January 19, 1998)(26)
</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 Form
10-Q for the quarter ended May 2, 1991.
(2) Exhibits 3.1.1, 10.7 and 10.14.2 are incorporated herein by reference to
Exhibits 3.1.1, 10.7 and 10.14.2, respectively, of Form 10-K for the year
ended January 30, 1997.
19
<PAGE>
(3) Exhibit 3.2 is incorporated herein by reference to Exhibit 3.2 of Form
10-Q for the quarter ended October 31, 1996.
(4) Exhibit 4.1 is incorporated herein by reference to Exhibit 1 of Form 8-A
Registration Statement filed with the Commission on March 4, 1997.
(5) Exhibit 4.2 is incorporated herein by reference to Exhibit 4.1 of Form S-3
Registration Statement 333-41793 filed with the Commission on December 9,
1997. 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.
(6) Exhibits 10.1, 10.1.1 and 10.1.2 are incorporated herein by reference to
Exhibits 10.1, 10.1.1 and 10.1.2, respectively, of Form 10-Q for the
quarter ended May 1, 1997.
(7) Exhibit 10.5 is incorporated herein by reference to Exhibit 10.5.1 of Form
10-K for the year ended January 30, 1986.
(8) 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 Form 10-K for the year ended February 2, 1989.
(9) 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 Form 10-Q for
the quarter ended November 2, 1989.
(10) Exhibit 10.9 is incorporated herein by reference to Exhibit 10.9 of Form
10-K for the year ended January 31, 1985.
(11) Exhibit 10.10 is incorporated herein by reference to exhibit 10.10 of Form
10-K for the year ended January 29, 1981.
(12) 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.
(13) Exhibit 10.10.2 is incorporated herein by reference to Exhibit 10.10.2 of
Form 10-Q for the quarter ended May 3, 1994.
(14) Exhibits 10.10.4 and 10.13.4 are incorporated herein by reference to
Exhibits 10.10.4 and 10.13.4 of Form 10-K for the year ended February 2,
1995.
(15) Exhibits 10.11, 10.16, 10.20, 10.21 and 10.22 are incorporated herein by
reference to Exhibits 10.11, 10.16, 10.20, 10.21 and 10.22, respectively,
of 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.
(16) Exhibits 10.12 and 10.17 are incorporated herein by reference to Exhibits
10.12 and 10.17, respectively, of Form 10-Q for the quarter ended October
29, 1987.
(17) Exhibit 10.12.1 is incorporated herein by reference to Exhibit 10.12.1 of
Form 10-Q for the quarter ended August 3, 1989.
20
<PAGE>
(18) Exhibit 10.13.1 is incorporated herein by reference to Exhibit 10.13.1 of
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
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
Form 10-Q for the quarter ended August 2, 1990.
(21) Exhibits 10.13.5, 10.23 and 10.24.1 are incorporated herein by reference
to Exhibits 10.13.5, 10.23 and 10.24.1, respectively, of Form 10-K for the
year ended February 1, 1996.
(22) Exhibit 10.14 is incorporated herein by reference to Exhibit 10.14 of Form
10-Q for the quarter ended November 3, 1994.
(23) Exhibit 10.14.1 is incorporated herein by reference to Exhibit 10.14.1 of
Form 10-Q for the quarter ended November 2, 1995.
(24) Exhibit 10.20.1 is incorporated herein by reference to Exhibit 10.20.1 of
Form 10-Q for the quarter ended August 4, 1994.
(25) Exhibits 10.24, 10.25 and 10.25.1 are incorporated herein by reference to
Exhibits 10.24, 10.25 and 10.25.1, respectively, of Form 10-Q for the
quarter ended May 4, 1995.
(26) Exhibits 99.1 and 99.2 are incorporated herein by reference to Exhibits
99.1 and 99.2, respectively, of the Company's Tender Offer Statement on
Schedule 14D-1 dated January 26, 1998.
21
EXHIBIT 10.20.2
AMENDMENT
ALBERTSON'S, INC.
1990 DEFERRED COMPENSATION PLAN
This Amendment is made by Albertson's, Inc., a Delaware corporation (the
"Corporation").
RECITALS:
A. The Corporation established the Albertson's, Inc. 1990 Deferred
Compensation Plan effective January 1, 1990 (the "Plan").
B. The Corporation, pursuant to Section 10.1 of the Plan, retained the right
to amend the Plan and Section 10.1 provides that the Plan may be amended by
the Grantor Trust Committee appointed by the Board of Directors of
Albertson's, Inc. (the "Committee").
C. The Committee has determined that it is advisable to amend the Plan in the
manner hereinafter set forth.
AMENDMENTS:
NOW, THEREFORE, be it resolved that the Plan is amended, as of January 1,
1998, in the following respects:
1. Section 1.11 (originally Section 1.10) (relating to the term "Disabled") in
Article I, Definitions is deleted and the other sections are renumbered
accordingly.
2. Section 1.12 (originally Section 1.12 and formerly Section 1.13) in Article
I, Definitions is amended and restated to read, in its entirety, as
follows:
1.12 "Eligible Employee" means any employee of the Employer who (i) (a)
holds a position of Vice President or above or is in the Company's Salary
Administration Program and (b) has a Base Salary of $55,000 or more (as
indexed pursuant to the Salary Schedule Adjustment), or (ii) satisfies such
other criteria as may be established by the Committee. An employee shall
cease to be an Eligible Employee if the employee does not receive his Base
Salary for four (4) or more consecutive weeks.
3. All other provisions of the Plan remain the same as in effect immediately
prior to this Amendment.
IN WITNESS WHEREOF, this instrument has been duly executed by the
undersigned on this 5th day of November, 1997.
ALBERTSON'S, INC.
a Delaware corporation
By: /s/ Thomas R. Saldin
Thomas R. Saldin
Executive Vice President,
Administration and General Counsel
EXHIBIT 13
ALBERTSON'S, INC.
Financial Review
Results of Operations
The Company has reported increased sales and earnings for 28 consecutive
years. Sales for 1997 were $14.7 billion, compared to $13.8 billion in 1996 and
$12.6 billion in 1995. 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
------------------------- --------------------------------
1997 1996 1995
1997 1996 1995 vs. 1996 vs. 1995 vs. 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 100.00 100.00 100.00 6.6 9.5 5.8
Gross profit 26.43 25.88 25.53 8.9 11.0 6.8
Selling, general and
administrative expenses 20.36 19.71 19.12 10.1 12.9 6.2
Operating profit 6.07 6.17 6.41 5.0 5.2 8.6
Net interest expense 0.56 0.47 0.44 27.9 16.1 (10.5)
Earnings before income taxes and
cumulative effect of accounting
change 5.63 5.77 6.03 4.0 4.8 11.8
Net earnings 3.52 3.58 3.69 4.7 6.2 16.1
</TABLE>
Increases in sales are primarily attributable to the continued expansion of
net retail square footage, and identical and comparable store sales increases
(including inflation). During 1997 the Company opened 64 stores, remodeled 35
stores and closed 12 stores for a net retail square footage increase of 3.0
million square feet. Net retail square footage increased 7.4% in 1997, 9.6% in
1996 and 7.6% in 1995. Identical store sales, stores that have been in operation
for two full fiscal years, increased 0.3% in 1997, 2.0% in 1996 and 0.8% in
1995. Comparable store sales, which include replacement stores, increased 0.4%
in 1997, 2.1% in 1996 and 1.0% in 1995. Identical and comparable store sales
continued to increase through higher average ticket sales per customer.
Management estimates that inflation accounted for approximately 0.3% of the
identical and comparable store sales increases in 1997, compared to 0.6% in both
1996 and 1995.
In addition to new store development, the Company plans to increase sales
through its continued investment in programs initiated in 1997 and 1996 which
are designed to provide solutions to customer needs. These programs include the
Front End Manager program; the home meal solutions process called "Quick Fixin'
IdeasSM"; special destination categories such as Albertson's Better Care
pharmacies, baby care, pet care, snack and beverage centers; and increased
emphasis on training programs utilizing Computer Guided Training. To provide
additional solutions to customer needs, the Company has added new,
gourmet-quality bakery products and organic grocery and produce items. Other
solutions include neighborhood marketing, targeted advertising, and exciting new
and remodeled stores.
Gross profit, as a percent to sales, increased in 1997 primarily as a
result of improvements made in retail stores, including substantial improvements
in under-performing stores. Gross profit, as a percent to sales, for 1997 and
1996 also increased due to the continued utilization of Company-owned
distribution facilities and increased buying efficiencies. Since 1994, all of
the Company's retail stores have been serviced by Company-owned distribution
centers which provide approximately 77% of all products purchased by Albertson's
retail stores. Utilization of the Company's distribution centers 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 0.06% in
1997, 0.11% in 1996 and 0.14% in 1995.
Selling, general and administrative (SG&A) expenses, as a percent to sales,
increased in 1997 and 1996 due primarily to increased salary and related benefit
costs resulting from the Company's initiatives to increase sales, and increased
depreciation expense associated with the Company's expansion program. The 1995
increase was due primarily to increased depreciation expense associated with the
Company's expansion program. In addition to increasing sales, the Company will
continue to implement new technology that increases productivity, and emphasize
cost containment programs to control SG&A expenses as a percent to sales.
Page 1
<PAGE>
The 1997 and 1996 increases in net interest expense resulted from
additional borrowings. The 1995 reduction in net interest expense resulted from
increased capitalized interest associated with the Company's capital expenditure
program and reduced average outstanding debt balances.
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 1997 was $865 million, compared to $648 million in
1996 and $786 million in 1995. During 1997 the Company spent $674 million on
capital expenditures, $194 million to purchase and retire stock and $156 million
for the payment of dividends (which represents 30.2% of 1997 net earnings).
The Company utilizes its commercial paper program primarily 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 $283 million of commercial paper borrowings
outstanding at January 29, 1998, compared to $329 million at January 30, 1997,
and $209 million at February 1, 1996. As of January 29, 1998, the Company had a
revolving credit agreement for $600 million which was reserved as alternative
funding for the Company's commercial paper program and bank lines of credit for
$45 million. The revolving credit 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.
Under a shelf registration statement filed with the Securities and Exchange
Commission (SEC) in May 1996, the Company issued $200 million of medium-term
notes in 1997 and $200 million of 30-year 7.75% debentures in 1996. In 1995 the
Company issued $200 million of 6.375% notes under a shelf registration statement
filed with the SEC in 1992. Proceeds from these issuances were used to reduce
borrowings under the Company's commercial paper program.
In late 1997 the Company filed a shelf registration statement with the SEC,
which became effective in January 1998, to authorize the issuance of up to $500
million in debt securities. The remaining authorization under a 1996 shelf
registration statement was rolled over into the 1997 shelf registration
statement. In February 1998 the Company issued $84 million of medium-term notes
under the 1997 shelf registration statement leaving $416 million of debt
securities available for issuance in the future.
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 program adopted by the Board of
Directors on March 2, 1998, authorizes the Company to purchase and retire up to
5 million shares from April 1, 1998 through March 31, 1999. Under these
programs, the Company purchased and retired 5.4 million shares in 1997, 1.6
million shares in 1996 and 2.6 million shares in 1995.
The following leverage ratios demonstrate the Company's levels of long-term
financing as of the indicated year end:
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt and capitalized lease obligations to capital(1) 31.8% 31.9% 27.3%
Long-term debt and capitalized lease obligations to total assets 21.7 22.3 17.7
</TABLE>
(1) Capital includes long-term debt and capitalized lease obligations and
stockholders' equity
The average size of stores opened in 1997, 54,600 square feet, increased
the Company's average store size to 48,700 square feet. At January 29, 1998, 95%
of the Company's retail square footage consisted of stores over 35,000 square
feet. Retail square footage has also increased due to the Company's remodel
program. In 1997, 4 of the 35 remodeled stores were expanded in size. The
Company continues to retain ownership of real estate when possible.
Page 2
<PAGE>
During the past three years, the Company has invested $162 million
(excluding inventory) in its distribution operations and has added 1.2 million
square feet of new or expanded facilities. A new 698,000-square-foot full-line
distribution center in the Company's Houston, Texas, market became fully
operational on March 18, 1996.
Capital expenditures for 1998 (excluding acquisitions and amounts
anticipated to be financed by operating leases) are expected to be approximately
$780 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
322 stores representing 39% of the Company's retail square footage as of January
29, 1998. The following historical summary of capital expenditures includes
capital leases, assets acquired with related debt and the estimated fair value
of property financed by operating leases (in thousands):
<TABLE>
<CAPTION>
1998
(Projected) 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New and acquired stores $465,000 $515,773 $460,188 $412,868
Remodels 145,000 96,973 117,358 120,709
Retail replacement equipment and
technological upgrades 50,000 41,628 52,478 15,692
Distribution facilities and equipment 80,000 28,399 34,812 98,731
Other 40,000 13,658 21,171 16,257
- ------------------------------------------------------------------------------------
Total capital expenditures 780,000 696,431 686,007 664,257
Estimated fair value of property
financed by operating leases 35,000 44,000 47,000 30,000
- ------------------------------------------------------------------------------------
$815,000 $740,431 $733,007 $694,257
- ------------------------------------------------------------------------------------
</TABLE>
The Company's strong financial position provides the flexibility for the
Company to grow through future acquisitions or to purchase and retire its common
stock if it so chooses. The Board of Directors at its March 1998 meeting
increased the regular quarterly cash dividend to $0.17 per share, for an annual
rate of $0.68 per share.
New Accounting Standards
In June 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This new standard requires the reporting of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This standard is effective for the
Company's 1998 fiscal year and is not expected to have a significant impact on
the Company's reporting requirements.
In June 1997 the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This new standard requires public
business enterprises to report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This standard is
effective for the Company's 1998 fiscal year. However, the reporting
requirements need not be applied to interim financial statements in the initial
year of application. The Company is in the process of evaluating its reporting
requirements under this standard.
Page 3
<PAGE>
Year 2000 Compliance
The Year 2000 issue results from computer programs being written using two
digits rather than four to define the applicable year. As the year 2000
approaches, systems using such programs may be unable to accurately process
certain date-based information. Like many other companies, the Company is
continuing to assess and modify its computer applications and business processes
to provide for their continued functionality. The Company is also continuing its
assessment of the readiness of external entities, such as vendors, which
interface with the Company.
In addition, the Company is addressing the Year 2000 issue both by
augmenting previously scheduled computer maintenance with procedures designed to
locate and correct Year 2000 problems and by slightly accelerating its normal
equipment and software replacement schedules. The Company does not expect the
costs associated with these procedures to be material.
The Company believes that its efforts will result in Year 2000 compliance.
However, the impact on business operations of failure by the Company to achieve
compliance or failure by external entities which the Company cannot control,
such as vendors, to achieve compliance, could be material to the Company's
consolidated results of operations.
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.
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 (including
environmental matters), labor negotiations, adverse effects of failure to
achieve Year 2000 compliance, the Company's ability to recruit and develop
employees, its ability to develop new stores or complete remodels as rapidly as
planned, its ability to successfully implement new technology 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. The Company does not undertake to update forward-looking
information contained herein or elsewhere to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
information.
Page 4
<PAGE>
ALBERTSON'S, INC.
Consolidated Earnings
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
January 29, January 30, February 1,
(In thousands except per share data) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 14,689,511 $ 13,776,678 $ 12,585,034
Cost of sales 10,807,687 10,211,348 9,371,736
- -----------------------------------------------------------------------------------------------------------
Gross profit 3,881,824 3,565,330 3,213,298
Selling, general and administrative expenses 2,990,172 2,715,776 2,406,082
- -----------------------------------------------------------------------------------------------------------
Operating profit 891,652 849,554 807,216
Other (expenses) income:
Interest, net (82,563) (64,569) (55,633)
Other, net 17,814 9,862 6,918
- -----------------------------------------------------------------------------------------------------------
Earnings before income taxes 826,903 794,847 758,501
Income taxes 310,089 301,068 293,540
- -----------------------------------------------------------------------------------------------------------
Net Earnings $ 516,814 $ 493,779 $ 464,961
- -----------------------------------------------------------------------------------------------------------
Earnings Per Share:
Basic $2.09 $1.96 $1.84
Diluted 2.08 1.95 1.83
Weighted average common shares outstanding:
Basic 247,735 251,710 253,080
Diluted 248,497 252,730 254,093
</TABLE>
See Notes to Consolidated Financial Statements
Page 5
<PAGE>
ALBERTSON'S, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 29, January 30, February 1,
(Dollars in thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 108,083 $ 90,865 $ 69,113
Accounts and notes receivable 121,023 98,364 98,340
Inventories 1,308,578 1,201,067 1,030,246
Prepaid expenses 44,426 42,823 22,855
Deferred income taxes 45,747 42,804 62,448
- ---------------------------------------------------------------------------------
Total Current Assets 1,627,857 1,475,923 1,283,002
Other Assets 207,360 184,070 155,427
Land, Buildings and Equipment, net 3,383,373 3,054,640 2,697,482
- ---------------------------------------------------------------------------------
Total Assets $5,218,590 $4,714,633 $4,135,911
- ---------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 742,557 $ 682,305 $ 648,963
Salaries and related liabilities 149,898 135,681 134,096
Taxes other than income taxes 80,842 67,086 44,413
Income taxes 37,657 14,409 35,546
Self-insurance 69,982 63,999 68,899
Unearned income 46,069 36,539 32,208
Other 52,395 46,161 38,815
Current maturities of long-term debt 86,511 975 78,237
Current capitalized lease obligations 9,608 7,938 7,316
- ---------------------------------------------------------------------------------
Total Current Liabilities 1,275,519 1,055,093 1,088,493
Long-Term Debt 989,650 921,704 602,993
Capitalized Lease Obligations 140,957 130,050 129,265
Other Long-Term Liabilities and Deferred
Credits 393,008 360,768 362,637
Commitments and Contingencies
Stockholders' Equity:
Preferred stock - $1.00 par value;
authorized - 10,000,000 shares;
designated - 3,000,000 shares of
Series A Junior Participating; issued
- none
Common stock - $1.00 par value;
authorized - 600,000,000 shares;
issued - 245,735,633 shares,
250,690,105 shares and 251,918,576
shares, respectively 245,736 250,690 251,919
Capital in excess of par value 4,271 92 3,269
Retained earnings 2,169,449 1,996,236 1,697,335
- ---------------------------------------------------------------------------------
Total Stockholders' Equity 2,419,456 2,247,018 1,952,523
- ---------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 5,218,590 $4,714,633 $4,135,911
- ---------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 6
<PAGE>
ALBERTSON'S, INC.
Consolidated Cash Flows
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
January 29, January 30, February 1,
(In thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 516,814 $ 493,779 $ 464,961
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 328,795 294,341 251,450
Net deferred income taxes (1,299) 33,868 (590)
Increase in cash surrender value of
Company-owned life insurance (14,113) (9,021) (7,868)
Changes in operating assets and liabilities:
Receivables and prepaid expenses (24,262) (19,992) 7,386
Inventories (107,511) (170,821) (81,685)
Accounts payable 60,252 33,342 73,412
Other current liabilities 59,591 14,716 18,482
Self-insurance 12,619 (11,234) 9,406
Unearned income 21,705 (10,735) 34,960
Other long-term liabilities 12,081 (313) 15,682
- -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 864,672 647,930 785,596
- -------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Capital expenditures (674,053) (673,310) (656,331)
Proceeds from disposals of land, buildings and equipment 37,098 31,095 23,267
Increase in other assets (9,177) (19,622) (24,778)
- -------------------------------------------------------------------------------------------------------
Net cash used in investing activities (646,132) (661,837) (657,842)
- -------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from long-term borrowings 200,000 202,000 202,525
Payments on long-term borrowings (8,995) (88,202) (211,463)
Net commercial paper activity (45,692) 119,601 99,657
Proceeds from stock options exercised 3,600 3,328 4,902
Cash dividends paid (156,261) (146,060) (126,672)
Stock purchased and retired (193,974) (55,008) (77,814)
- -------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (201,322) 35,659 (108,865)
- -------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 17,218 21,752 18,889
Cash and Cash Equivalents at Beginning of Year 90,865 69,113 50,224
- -------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 108,083 $ 90,865 $ 69,113
- -------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 7
<PAGE>
ALBERTSON'S, INC.
Consolidated Stockholders' Equity
<TABLE>
<CAPTION>
Common Capital in
Stock $1.00 Excess of Retained
(In thousands except per share data) Par Value Par Value Earnings Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at February 2, 1995 $ 253,984 $ 11,322 $ 1,422,587 $ 1,687,893
Exercise of stock options 515 4,387 4,902
Tax benefits related to stock options 4,064 4,064
Stock purchased and retired (2,580) (16,504) (58,730) (77,814)
Cash dividends, $0.52 per share (131,483) (131,483)
Net earnings 464,961 464,961
- ---------------------------------------------------------------------------------------------------------------
Balance at February 1, 1996 251,919 3,269 1,697,335 1,952,523
Exercise of stock options 351 2,977 3,328
Tax benefits related to stock options 3,310 3,310
Stock purchased and retired (1,580) (9,464) (43,964) (55,008)
Cash dividends, $0.60 per share (150,914) (150,914)
Net earnings 493,779 493,779
- ---------------------------------------------------------------------------------------------------------------
Balance at January 30, 1997 250,690 92 1,996,236 2,247,018
Exercise of stock options 414 3,186 3,600
Tax benefits related to stock options 3,974 3,974
Stock purchased and retired (5,368) (2,981) (185,625) (193,974)
Cash dividends, $0.64 per share (157,976) (157,976)
Net earnings 516,814 516,814
- ---------------------------------------------------------------------------------------------------------------
Balance at January 29, 1998 $ 245,736 $ 4,271 $ 2,169,449 $ 2,419,456
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 8
<PAGE>
ALBERTSON'S, INC.
Notes to Consolidated Financial Statements
The Company
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. Based on sales, the Company is one of the largest retail food-drug
chains in the United States. As of January 29, 1998, the Company operated 878
stores in 20 Western, Midwestern and Southern states. Retail operations are
supported by 11 Company-owned distribution centers, strategically located in the
Company's operating markets.
Summary of Significant Accounting Policies
Fiscal Year End: The Company's fiscal year is generally 52 weeks and
periodically consists of 53 weeks because the 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. Investments, which consist of government-backed money
market funds and repurchase agreements backed by government securities, are
recorded at cost which approximates market value.
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 the
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.
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.
Unearned Income: Unearned income consists primarily of buying and
promotional allowances received from vendors in connection with the Company's
buying and merchandising activities. These funds are recognized as revenue when
earned by purchasing specified amounts of product or promoting certain products.
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.
Page 9
<PAGE>
Advertising: Advertising costs incurred to produce media advertising for
major new campaigns are expensed in the year in which the advertising first
takes place. Other advertising costs are expensed when incurred. Cooperative
advertising income from vendors is recorded in the period in which the related
expense is incurred. Net advertising expenses of $44,018,000, $34,746,000 and
$8,729,000 were included with cost of sales in the Company's Consolidated
Earnings for 1997, 1996 and 1995, respectively.
Stock Options: Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost of stock
options is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the option exercise price and 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.
Earnings Per Share: Earnings per share (EPS) are computed in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings per Share."
Basic EPS is computed by dividing consolidated net earnings by the weighted
average number of common shares outstanding. Diluted EPS is computed by dividing
consolidated net earnings by the sum of the weighted average number of common
shares outstanding and the weighted average number of potential common shares
outstanding. Potential common shares consist solely of outstanding options under
the Company's stock option plans. Outstanding options excluded from the
computation of potential common shares (option price exceeded the average market
price during the period) amounted to 1,520,000 shares for 1997, 24,000 shares
for 1996 and 1,014,000 shares for 1995.
Reclassifications: Certain reclassifications have been made in prior years'
financial statements to conform to classifications used in the current year.
Use of Estimates: 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.
Supplemental Cash Flow Information
Selected cash payments and noncash activities were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash payments for income taxes $284,030 $288,590 $284,383
Cash payments for interest, net of amounts capitalized 65,930 59,284 45,131
Noncash investing and financing activities:
Capitalized lease obligations incurred 22,228 12,005 7,926
Capitalized lease obligations terminated 1,632 3,240 1,232
Tax benefits related to stock options 3,974 3,310 4,064
Liabilities assumed in connection with asset acquisitions 150 692
</TABLE>
Page 10
<PAGE>
Accounts and Notes Receivable
Accounts and notes receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Trade and other accounts receivable $ 119,856 $ 97,186 $ 95,112
Current portion of notes receivable 2,367 2,178 4,478
Allowance for doubtful accounts (1,200) (1,000) (1,250)
- -----------------------------------------------------------------------------
$ 121,023 $ 98,364 $ 98,340
- -----------------------------------------------------------------------------
</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 $242,020,000, $232,849,000 and
$217,831,000 higher at the end of 1997, 1996 and 1995, respectively. Net
earnings (basic and diluted earnings per share) would have been higher by
$5,732,000 ($0.02) in 1997, $9,329,000 ($0.04) in 1996 and $10,478,000 ($0.04)
in 1995. The replacement cost of inventories valued at LIFO approximates FIFO
cost.
Land, Buildings and Equipment
Land, buildings and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 795,246 $ 700,208 $ 611,588
Buildings 2,055,276 1,799,976 1,525,769
Fixtures and equipment 1,779,469 1,607,454 1,427,047
Leasehold improvements 372,428 328,249 315,658
Capitalized leases 203,217 186,768 183,316
- --------------------------------------------------------------------------------------
5,205,636 4,622,655 4,063,378
Less accumulated depreciation and amortization 1,822,263 1,568,015 1,365,896
- --------------------------------------------------------------------------------------
$3,383,373 $3,054,640 $2,697,482
- --------------------------------------------------------------------------------------
</TABLE>
Page 11
<PAGE>
Indebtedness
Long-term debt includes the following (in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial paper $ 283,304 $ 328,996 $ 209,395
Unsecured medium-term notes issued in 1997 200,000
Unsecured 7.75% debentures due June 2026 200,000 200,000
Unsecured 6.375% notes due June 2000 200,000 200,000 200,000
Unsecured medium-term notes issued in 1993 175,075 175,075 252,075
Industrial revenue bonds 14,230 14,860 15,710
Mortgage notes and other unsecured notes payable 3,552 3,748 4,050
- --------------------------------------------------------------------------------------------------
1,076,161 922,679 681,230
Current maturities (86,511) (975) (78,237)
- --------------------------------------------------------------------------------------------------
$ 989,650 $ 921,704 $ 602,993
- --------------------------------------------------------------------------------------------------
</TABLE>
The Company has in place a $600 million commercial paper program. Interest
rates on the outstanding commercial paper borrowings as of January 29, 1998,
ranged from 5.53% to 5.90% with an effective weighted average rate of 5.63%. 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.
In July 1997 the Company issued $200 million of medium-term notes under a
shelf registration statement filed with the Securities and Exchange Commission
(SEC) in May 1996. The notes mature at various dates between July 2007 and July
2027. Interest is paid semiannually at rates ranging from 6.56% to 7.15%. The
weighted average interest rate on these notes outstanding at January 29, 1998,
was 6.81%. Proceeds from the issuance were used to repay borrowings under the
Company's commercial paper program.
In June 1996 the Company issued $200 million of 7.75% debentures under a
shelf registration statement filed with the SEC in May 1996. Interest is paid
semiannually. Proceeds from the issuance were used to repay borrowings under the
Company's commercial paper program.
In June 1995 the Company issued $200 million of 6.375% notes under a shelf
registration statement filed with the SEC in 1992. Interest is paid
semiannually. Proceeds from the issuance were used to reduce borrowings under
the Company's commercial paper program.
The medium-term notes issued in 1993 mature in March 1998 and March 2000.
Interest is paid semiannually at rates ranging from 5.58% to 6.28%. The weighted
average interest rate on these notes outstanding at January 29, 1998, was 5.92%.
The industrial revenue bonds are payable in varying annual installments
through 2011, with interest paid semiannually at rates ranging from 4.40% to
6.95%. The weighted average interest rate on these amounts outstanding at
January 29, 1998, was 5.96%.
The Company has pledged real estate with a cost of $14,870,000 as
collateral for the mortgage notes, which are payable semiannually, including
interest at rates ranging from 7.875% to 16.5%. The notes mature from 1998 to
2011. The weighted average interest rate on these amounts outstanding at January
29, 1998, was 16.0%.
The scheduled maturities of long-term debt outstanding at January 29, 1998,
are summarized as follows: $86,511,000 in 1998, $1,122,000 in 1999, $290,925,000
in 2000, $284,746,000 in 2001, $1,636,000 in 2002 and $411,221,000 thereafter.
The Company has in place a revolving credit agreement with several banks,
whereby the Company may borrow principal amounts up to $600 million at varying
interest rates any time prior to December 17, 2001. 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.
Page 12
<PAGE>
In late 1997 the Company filed a shelf registration statement with the SEC,
which became effective in January 1998, to authorize the issuance of up to $500
million in debt securities. The remaining authorization under a 1996 shelf
registration statement was rolled over into the 1997 shelf registration
statement.
In addition to amounts available under the revolving credit agreement, the
Company had lines of credit from banks at prevailing interest rates for $45
million at January 29, 1998. The cash balances maintained at these banks are not
legally restricted. There were no amounts outstanding under the Company's lines
of credit as of January 29, 1998, January 30, 1997, or February 1, 1996.
Net interest expense was as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt $ 66,418 $ 48,534 $ 39,323
Capitalized leases 16,629 15,168 15,234
Capitalized interest (8,683) (6,378) (7,428)
- --------------------------------------------------------------------------------
Interest expense 74,364 57,324 47,129
Net bank service charges 8,199 7,245 8,504
- --------------------------------------------------------------------------------
$ 82,563 $ 64,569 $ 55,633
- --------------------------------------------------------------------------------
</TABLE>
Other Long-Term Liabilities and Deferred Credits
Other long-term liabilities and deferred credits consist of the following
(in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred compensation $ 43,014 $ 37,905 $ 33,354
Deferred income taxes 17,520 15,876 1,652
Deferred rents payable 64,674 69,305 71,468
Self-insurance 114,227 107,591 113,925
Unearned income 81,931 69,756 84,822
Other 71,642 60,335 57,416
- ------------------------------------------------------------------------------
$393,008 $360,768 $362,637
- ------------------------------------------------------------------------------
</TABLE>
Capital Stock
On December 2, 1996, the Board of Directors adopted a stockholder rights
plan, under which all stockholders of record on March 21, 1997, received a
dividend distribution of one nonvoting right for each share of common stock
held. Subject to certain exceptions, one right will also be issued with each
share of common stock issued after March 21, 1997. Each right will entitle the
holder to purchase, under certain circumstances, one one-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $1.00 per share, of the
Company (the "preferred stock") at a price of $160. Subject to certain
exceptions, the rights will become exercisable for shares of preferred stock 10
business days (or such later date as may be determined by the Board of
Directors) following the commencement of a tender offer or exchange offer that
would result in a person or group beneficially owning 15% or more of the
outstanding shares of common stock.
Subject to certain exceptions, if any person or group becomes the
beneficial owner of 15% or more of the outstanding common stock, each right then
will entitle its holder, other than such person or group, upon payment of the
$160 exercise price, to purchase common stock (or, in certain circumstances,
cash, property or other securities of the Company) with a value equal to twice
the exercise price. However, the rights are not exercisable until such time as
the rights are no longer redeemable by the Company as set forth below.
Page 13
<PAGE>
All of the rights may be redeemed by the Board of Directors at a price of
$0.001 per right until the earlier of (i) 10 days following the acquisition by
any person or group of 15% or more of the outstanding common stock or (ii) the
date the stockholder rights plan expires. Notwithstanding the foregoing, the
rights generally may not be redeemed for one hundred eighty (180) days following
a change in a majority of the Board of Directors as a result of a proxy contest
or consent solicitation. The rights, which are not entitled to dividends, will
expire at the close of business on March 21, 2007, unless earlier redeemed or
extended by the Company.
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, and expired by its terms on March 23, 1997. Under the plan,
stockholders of record on March 23, 1987, received a dividend distribution of
one nonvoting right for each share of common stock and, subject to certain
exceptions, one right was issued with each share of common stock issued between
March 23, 1987, and the date of expiration of the plan. The rights attached to
all common stock certificates and no separate rights certificates were
distributed. Each right entitled the holder to purchase one share of the
Company's common stock at a price of $60 when they became exercisable as a
result of certain events. The rights, which were not entitled to dividends,
expired on March 23, 1997, and no rights became exercisable during the period
they were outstanding.
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 program adopted by the Board of
Directors on March 2, 1998, authorizes the Company to purchase and retire up to
5 million shares through March 31, 1999. The Company has purchased and retired
an equivalent of 22.0 million shares of its common stock for $483 million under
these programs, at an average price of $21.98 per share.
Income Taxes
Deferred tax assets and liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets (no valuation
allowances considered necessary):
Nondeductible accruals for:
Self-insurance $ 71,243 $ 67,547 $ 70,669
Lease accounting 19,517 20,238 20,601
Vacations 18,200 17,057 19,917
Deferred compensation 17,358 15,406 15,832
Postemployment benefits 15,407 13,721 13,224
Property valuation 8,845 8,339 10,300
Postretirement benefits 6,042 5,057 4,225
Pension costs 3,854 3,387 2,930
Other 4,495 3,996 3,189
Income unearned for financial reporting purposes 29,136 30,741 44,355
Costs capitalized for tax purposes 4,724 5,615 9,999
- ---------------------------------------------------------------------------------------------------------------
Total deferred tax assets 198,821 191,104 215,241
- ---------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Accelerated depreciation for tax purposes (123,541) (120,975) (116,267)
Pension costs expensed for tax purposes (18,215) (20,264) (23,803)
Inventory valuation (12,155) (8,863) (7,676)
Funded benefits (9,014) (7,778) (1,647)
Deferred gains (6,803) (6,103) (4,929)
Other (866) (193) (123)
- ---------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities (170,594) (164,176) (154,445)
- ---------------------------------------------------------------------------------------------------------------
Net deferred tax assets $ 28,227 $ 26,928 $ 60,796
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 14
<PAGE>
Income tax expense on continuing operations consists of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 273,896 $ 229,006 $ 252,587
State 37,664 38,367 41,729
- -----------------------------------------------------------------------------------------
311,560 267,373 294,316
- -----------------------------------------------------------------------------------------
Deferred:
Federal (1,142) 29,008 (506)
State (157) 4,860 (84)
- -----------------------------------------------------------------------------------------
(1,299) 33,868 (590)
- -----------------------------------------------------------------------------------------
Amortization of deferred investment tax credits (172) (173) (186)
- -----------------------------------------------------------------------------------------
$ 310,089 $ 301,068 $ 293,540
- -----------------------------------------------------------------------------------------
Deferred taxes resulted from:
Income unearned for financial reporting purposes $ 1,605 $ 13,614 $ (12,981)
Accelerated depreciation for tax purposes 2,566 4,708 5,937
Self-insurance (3,696) 3,122 (3,785)
Litigation 22 155 9,331
Inventory valuation 3,292 1,187 6,898
Costs capitalized for tax purposes 891 4,384 1,157
Deferred compensation (1,952) 426 (9,328)
Property valuation (506) 1,961 (1,433)
Pension costs expensed for tax purposes (2,049) (3,539) 5,763
Funded benefits 1,236 6,131 1,647
Other (2,708) 1,719 (3,796)
- -----------------------------------------------------------------------------------------
$ (1,299) $ 33,868 $ (590)
- -----------------------------------------------------------------------------------------
</TABLE>
The reconciliations between the federal statutory tax rate and the
Company's effective tax rates are as follows (in thousands):
<TABLE>
<CAPTION>
1997 Percent 1996 Percent 1995 Percent
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate $ 289,416 35.0 $ 278,196 35.0 $ 265,476 35.0
State income taxes net of
federal income tax benefit 24,268 2.9 28,345 3.6 26,656 3.5
Amortization of deferred
investment tax credits (172) (173) (186)
Other (3,423) (0.4) (5,300) (0.7) 1,594 0.2
- ---------------------------------------------------------------------------------------------------------
$ 310,089 37.5 $ 301,068 37.9 $ 293,540 38.7
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Page 15
<PAGE>
Stock Options
The Company has two stock option plans currently in effect under which
grants may be made with respect to 10,400,000 shares of the Company's common
stock. Under these plans, approved by the stockholders in 1995, options may be
granted to officers and key employees, and to directors, respectively, to
purchase the Company's common stock. Generally, options are granted with an
exercise price at not less than 100% of the closing market price on the date of
the grant, become exercisable in installments of 20% per year on each of the
fifth through ninth anniversaries of the grant date and have a maximum term of
10 years.
A summary of shares reserved for outstanding options as of the fiscal year
end, changes during the year and related weighted average exercise price is
presented below (shares in thousands):
<TABLE>
<CAPTION>
January 29, 1998 January 30, 1997 February 1, 1996
---------------- ---------------- ----------------
Shares Price Shares Price Shares Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,056 $ 25.29 3,824 $ 21.51 3,468 $ 16.50
Granted 1,524 45.48 790 35.14 1,044 31.76
Exercised (507) 14.09 (376) 10.91 (540) 9.84
Forfeited (55) 23.12 (182) 18.35 (148) 19.05
- ------------------------------------------------------------------------------------------------------
Outstanding at end of year 5,018 $ 32.58 4,056 $ 25.29 3,824 $ 21.51
- ------------------------------------------------------------------------------------------------------
</TABLE>
As of January 29, 1998, there were 7,076,000 shares of common stock
reserved for the granting of additional options.
The following table summarizes options outstanding and options exercisable
as of January 29, 1998, and the related weighted average remaining contractual
life (years) and weighted average exercise price (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Option Price Shares Remaining Shares
Per Share Outstanding Life Price Exercisable Price
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 8.69 to $ 8.69 69 0.8 $ 8.69 62 $ 8.69
13.44 to 16.88 803 3.2 16.11 181 16.14
22.63 to 33.25 1,862 6.7 28.94 71 27.85
35.00 to 45.69 2,284 9.0 42.06 22 39.75
- ------------------------------------------------------------------------------------
$ 8.69 to $ 45.69 5,018 7.1 $ 32.58 336 $ 18.81
- ------------------------------------------------------------------------------------
</TABLE>
The weighted average fair value at date of grant for options granted during
1997, 1996 and 1995 was $15.26, $10.74 and $9.39 per option, respectively. The
fair value of options at date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 6.5 7.0 6.9
Risk-free interest rate 5.92% 6.24% 5.74%
Volatility 26.53 22.06 22.26
Dividend yield 1.41 1.70 1.64
</TABLE>
Page 16
<PAGE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock options granted in 1997, 1996 or 1995. Had compensation cost been
determined based on the fair value at the grant date consistent with the
provisions of this statement, the Company's pro forma net earnings and earnings
per share would have been as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings - as reported $ 516,814 $ 493,779 $ 464,961
Net earnings - pro forma 514,602 492,558 464,687
Basic earnings per share - as reported 2.09 1.96 1.84
Basic earnings per share - pro forma 2.08 1.96 1.84
Diluted earnings per share - as reported 2.08 1.95 1.83
Diluted earnings per share - pro forma 2.07 1.95 1.83
</TABLE>
The pro forma effect on net earnings for 1997, 1996 and 1995 is not
representative of the pro forma effect on net earnings in future years because
it does not take into consideration pro forma compensation expense related to
grants made prior to 1995.
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 qualified, 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 the larger of the amount required to fully fund the Plan's
current liability or the amount necessary to meet the funding requirements as
defined by the Internal Revenue Code.
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.
In February 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." The Company has elected the early
adoption provisions of this standard as discussed in the following notes.
Net periodic benefit 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 pension and
postretirement benefit plans were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted-average discount rate 6.60% 7.50% 7.25%
Annual salary increases 4.50-5.00 4.50-5.00 4.50-5.00
Expected long-term rate of return on assets 9.50 9.50 9.00
</TABLE>
Page 17
<PAGE>
Net periodic benefit cost for Company-sponsored pension plans was as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 26,776 $ 24,138 $ 16,172
Interest cost on projected benefit obligations 23,174 20,095 16,149
Expected return on assets (34,118) (30,600) (22,962)
Amortization of transition asset (6) (6) (6)
Amortization of prior service cost 944 944 944
Recognized net actuarial (gain) loss (145) 39 (607)
- ---------------------------------------------------------------------------------------------------------
$ 16,625 $ 14,610 $ 9,690
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the funded status of the Company-sponsored
pension plans (in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in projected benefit obligation:
Beginning of year benefit obligation $ 293,842 $ 269,645 $ 187,476
Service cost 26,776 24,138 16,172
Interest cost 23,174 20,095 16,149
Actuarial loss (gain) 75,565 (12,716) 54,577
Benefits paid (7,374) (7,320) (4,729)
- ----------------------------------------------------------------------------------------------------------------
End of year benefit obligation 411,983 293,842 269,645
- ----------------------------------------------------------------------------------------------------------------
Change in plan assets:
Plan assets at fair value at beginning of year 354,806 321,758 240,534
Actual return on plan assets 56,700 36,295 62,497
Employer contributions 10,400 4,073 23,456
Benefit payments (7,374) (7,320) (4,729)
- ----------------------------------------------------------------------------------------------------------------
Plan assets at fair value at end of year 414,532 354,806 321,758
- ----------------------------------------------------------------------------------------------------------------
Funded status 2,549 60,964 52,113
Unrecognized net loss (gain) 29,922 (23,205) (4,755)
Unrecognized prior service cost 4,483 5,427 6,371
Unrecognized net transition liability 542 536 530
Additional minimum liability (2,612) (1,080) (1,605)
- ----------------------------------------------------------------------------------------------------------------
Net prepaid pension cost $ 34,884 $ 42,642 $ 52,654
- ----------------------------------------------------------------------------------------------------------------
Prepaid pension cost included with other assets $ 47,559 $ 52,497 $ 61,875
Accrued pension cost included with other long-term
liabilities (12,675) (9,855) (9,221)
- ----------------------------------------------------------------------------------------------------------------
Net prepaid pension cost $ 34,884 $ 42,642 $ 52,654
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 18
<PAGE>
The following table summarizes the Company-sponsored pension plans which
have projected benefit obligations in excess of plan assets and the accumulated
benefit obligation of the unfunded makeup plan in which the accumulated benefit
obligation exceeds plan assets (in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Projected benefit obligation in excess of plan assets:
Projected benefit obligation $240,869 $ 11,761 $ 11,003
Fair value of plan assets 217,743
Accumulated benefit obligation in excess of plan assets:
Accumulated benefit obligation 12,675 9,855 9,221
</TABLE>
Assets of the two funded Company plans are invested in directed trusts.
Assets in the directed trusts are invested in common stocks (including
$52,363,000, $38,445,000 and $38,859,000 of the Company's common stock at
January 29, 1998, January 30, 1997, and February 1, 1996, respectively), U.S.
Government obligations, corporate bonds, international equity funds, real estate
and money market funds.
The Company also contributes to various plans under industrywide collective
bargaining agreements, primarily for defined benefit pension plans. Total
contributions to these plans were $22,454,000 for 1997, $24,884,000 for 1996 and
$23,777,000 for 1995.
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 determined and made by the
employees and the Company incurs no material costs in connection with this plan.
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. The net periodic post-retirement benefit cost was as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $1,483 $1,304 $ 979
Interest cost 1,138 989 889
Amortization of unrecognized loss 22
- ---------------------------------------------------------------------------------
$2,621 $2,315 $1,868
- ---------------------------------------------------------------------------------
</TABLE>
Page 19
<PAGE>
The following table sets forth the funded status of the Company-sponsored
postretirement health and life insurance benefit plan (in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in accumulated benefit obligation:
Beginning of year benefit obligation $ 14,153 $ 12,486 $ 8,216
Service cost 1,483 1,304 979
Interest cost 1,138 989 889
Plan participants' contributions 1,396 1,237 1,131
Actuarial loss (gain) 721 (428) 2,904
Benefits paid (1,344) (1,435) (1,633)
- -------------------------------------------------------------------------------
End of year benefit obligation 17,547 14,153 12,486
- -------------------------------------------------------------------------------
Plan assets activity:
Employer (excess) contributions (52) 198 502
Plan participants' contributions 1,396 1,237 1,131
Benefit payments (1,344) (1,435) (1,633)
- -------------------------------------------------------------------------------
Funded status (17,547) (14,153) (12,486)
Unrecognized net loss 1,773 1,052 1,503
- -------------------------------------------------------------------------------
Accrued postretirement benefit obligations
included with other long-term liabilities $(15,774) $(13,101) $(10,983)
- -------------------------------------------------------------------------------
</TABLE>
Annual rates of increases in health care costs are not applicable in the
calculation of the benefit obligation because the Company's contribution is a
fixed amount.
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" requires employers to recognize an obligation for
benefits provided to former or inactive employees after employment but before
retirement. The Company is self-insured under its employees' short-term and
long-term disability plans which are the primary benefits paid to inactive
employees prior to retirement. Following is a summary of the obligation for
postemployment benefits included in the Company's consolidated balance sheets
(in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Included with salaries and related liabilities $ 6,661 $ 4,620 $ 4,427
Included with other long-term liabilities 33,567 30,927 29,949
- --------------------------------------------------------------------------------------
$ 40,228 $ 35,547 $ 34,376
- --------------------------------------------------------------------------------------
</TABLE>
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 $96,465,000 for
1997, $100,043,000 for 1996 and $84,709,000 for 1995.
The Company has bonus plans for store management personnel and other key
management personnel. Amounts charged to earnings under all bonus plans were
$66,986,000 for 1997, $66,142,000 for 1996 and $58,782,000 for 1995.
Page 20
<PAGE>
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 $1,363,000 in 1997, $1,781,000 in 1996 and $1,948,000 in 1995. Following is
an analysis of the Company's capitalized leases (in thousands):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Real estate and equipment $203,217 $186,768 $183,316
Accumulated amortization (87,204) (83,208) (81,938)
- ---------------------------------------------------------------------------------
$116,013 $103,560 $101,378
- ---------------------------------------------------------------------------------
</TABLE>
Future minimum lease payments for noncancelable operating leases, related
subleases and capital leases at January 29, 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
Operating Capital
Leases Subleases Leases
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ 80,177 $ (16,383) $ 26,482
1999 82,111 (14,435) 25,874
2000 79,804 (11,394) 25,762
2001 78,176 (9,604) 25,558
2002 74,022 (6,878) 18,434
Remainder 645,928 (23,168) 202,317
- --------------------------------------------------------------------------------------
Total minimum obligations (receivables) $ 1,040,218 $ (81,862) 324,427
- -----------------------------------------------------------------------
Interest (173,862)
- --------------------------------------------------------------------------------------
Present value of net minimum obligations 150,565
Current portion (9,608)
- --------------------------------------------------------------------------------------
Long-term obligations at January 29, 1998 $ 140,957
- --------------------------------------------------------------------------------------
</TABLE>
The present value of minimum lease payments under operating leases using an
assumed discount rate of 8.0% was approximately $532 million at January 29,
1998.
Rent expense under operating leases was as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $ 81,402 $ 77,214 $ 68,528
Contingent rent 3,469 4,155 4,088
- -----------------------------------------------------------------------------
84,871 81,369 72,616
Sublease rent (31,120) (23,498) (19,573)
- -----------------------------------------------------------------------------
$ 53,751 $ 57,871 $ 53,043
- -----------------------------------------------------------------------------
</TABLE>
Page 21
<PAGE>
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. Minimum rentals guaranteed under assigned leases are $6.4
million in 1998 and aggregate $47.7 million for the remaining lease terms, which
expire at various dates through 2028. 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.
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash equivalents and
receivables. The Company limits the amount of credit exposure to each individual
financial institution and places its temporary cash into investments of high
credit quality. Concentrations of credit risk with respect to receivables are
limited due to their dispersion across various companies and geographies.
The estimated fair values of cash and cash equivalents, accounts
receivable, accounts payable, short-term debt and commercial paper borrowings
approximate their carrying amounts. The estimated fair values and carrying
amounts of long-term debt borrowings (excluding commercial paper) were as
follows (in millions):
<TABLE>
<CAPTION>
January 29, January 30, February 1,
1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value $ 833.8 $ 606.3 $ 483.9
Carrying amount 792.9 593.7 471.8
</TABLE>
Substantially all of these fair values were determined from quoted market
prices. The Company has not determined the fair value of lease guarantees due to
the inherent difficulty in evaluating the credit worthiness of each tenant.
New Accounting Standards
In June 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This new standard requires the reporting of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This standard is effective for the
Company's 1998 fiscal year and is not expected to have a significant impact on
the Company's reporting requirements.
In June 1997 the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This new standard requires public
business enterprises to report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This standard is
effective for the Company's 1998 fiscal year. However, the reporting
requirements need not be applied to interim financial statements in the initial
year of application. The Company is in the process of evaluating its reporting
requirements under this standard.
Legal Proceedings
Three civil lawsuits filed in September 1996 as purported statewide class
actions in Washington, California and Florida and two civil lawsuits filed in
April 1997 in federal court in Boise, Idaho, as purported multi-state class
actions (including the remaining states in which the Company operated at the
time) have been brought against the Company raising various issues that include:
(i) allegations that the Company has a widespread practice of permitting its
employees to work "off-the-clock" without being paid for their work and (ii)
allegations that the Company's bonus and workers' compensation plans are
unlawful. Four of these suits are being sponsored and financed by the United
Food and Commercial Workers (UFCW) International Union. The five suits have been
consolidated in Boise, Idaho. In addition, three other similar suits have been
filed as purported class actions in Colorado, New Mexico and Nevada which, in
effect, duplicate the coverage of the UFCW-sponsored suits. These cases may
ultimately be transferred to, or consolidated with, the pending Boise
litigation.
Page 22
<PAGE>
The Company is committed to full compliance with all applicable laws.
Consistent with this commitment, the Company has firm and long-standing policies
in place prohibiting off-the-clock work and has structured its bonus and
workers' compensation plans to comply with applicable law. The Company 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. The Company intends to
vigorously defend against all of these lawsuits, and, at this stage of the
litigation, the Company believes that it has strong defenses against them.
Although these lawsuits are subject to the uncertainties inherent in the
litigation process, based on the information presently available to the Company,
management does not expect the ultimate resolution of these actions to have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
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, results of operations or cash flows.
Subsequent Events
On January 30, 1998, the Company closed its transaction to purchase all of
the outstanding shares of Seessel's Holdings, Inc. (Seessel's), a wholly owned
subsidiary of Bruno's, Inc. for cash consideration of approximately $88 million.
The transaction included 10 Seessel's grocery stores in the Memphis, Tennessee,
market. It also included a central bakery and a central kitchen which
manufacture fresh bakery and prepared foods for distribution to the Seessel's
stores.
On January 20, 1998, the Company entered into a definitive agreement to
acquire the outstanding shares of Buttrey Food and Drug Stores Company (Buttrey)
for cash consideration of approximately $137 million. Buttrey, headquartered in
Great Falls, Montana, is a leading supermarket and pharmacy retailer operating
43 stores in Montana, North Dakota and Wyoming. On January 26, 1998, Locomotive
Acquisition Corp., a wholly owned subsidiary of the Company, commenced a cash
tender offer to purchase all outstanding Buttrey shares for $15.50 per share.
The offer is subject to regulatory approval and certain conditions, including
the tender of a majority of the outstanding Buttrey shares. On February 23,
1998, the tender offer was extended to April 30, 1998, with all terms and
conditions remaining unchanged. As of the close of business on February 23,
1998, approximately 94% of the total number of shares had been tendered pursuant
to the Company's offer.
On March 13, 1998, the Company announced that it had entered into an
agreement to acquire Smitty's Super Markets, Inc. (Smitty's) subject to the
satisfactory completion of due diligence and other conditions. Smitty's is one
of the largest grocery store chains in the Springfield and Joplin, Missouri,
areas operating 10 combination stores and two fuel centers.
In February 1998 the Company issued $84 million of medium-term notes under
a shelf registration statement filed with the Securities and Exchange Commission
in late 1997. Proceeds from the issuance were used to reduce borrowings under
the Company's commercial paper program. Debt securities of up to $416 million
remain available for issuance under the 1997 shelf registration statement.
Page 23
<PAGE>
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, composed entirely of outside
directors, oversees the fulfillment by management of its responsibilities over
financial controls and the preparation of financial statements. The Audit
Committee meets with internal and external auditors four 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.
/s/ Gary G. Michael /s/ A. Craig Olson
Gary G. Michael A. Craig Olson
Chairman of the Board and Senior Vice President, Finance and
Chief Executive Officer Chief Financial Officer
Page 24
<PAGE>
Independent Auditors' Report
[Deloitte & Touche Logo]
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 January 29, 1998, January 30, 1997, and
February 1, 1996, 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 January 29, 1998, January 30, 1997, and February 1, 1996, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Boise, Idaho
March 18, 1998
Page 25
<PAGE>
ALBERTSON'S, INC.
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks 52 Weeks 53 Weeks
January 29, January 30, February 1, February 2, February 3,
(Dollars in thousands except per share data) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results:
Sales $ 14,689,511 $ 13,776,678 $ 12,585,034 $ 11,894,621 $ 11,283,678
Gross profit 3,881,824 3,565,330 3,213,298 3,007,894 2,779,671
Interest expense:
Debt 57,735 42,156 31,895 38,806 27,945
Capitalized lease obligations 16,629 15,168 15,234 13,412 12,233
Earnings before income taxes
and cumulative effect of
accounting change 826,903 794,847 758,501 678,652 552,215
Income taxes 310,089 301,068 293,540 261,281 212,534
Earnings before cumulative effect
of accounting change 516,814 493,779 464,961 417,371 339,681
Cumulative effect of accounting
change (17,006)
Net earnings 516,814 493,779 464,961 400,365 339,681
Net earnings as a percent to sales 3.52% 3.58% 3.69% 3.37% 3.01%
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock Data:
Earnings per share before cumulative
effect of accounting change:
Basic $2.09 $1.96 $1.84 $1.65 $1.34
Diluted 2.08 1.95 1.83 1.64 1.33
Cumulative effect of accounting
change (.07)
Earnings per share:
Basic 2.09 1.96 1.84 1.58 1.34
Diluted 2.08 1.95 1.83 1.57 1.33
Cash dividends per share 0.64 0.60 0.52 0.44 0.36
Book value per share 9.85 8.96 7.75 6.65 5.48
- --------------------------------------------------------------------------------------------------------------------------------
Financial Position:
Total assets $ 5,218,590 $ 4,714,633 $ 4,135,911 $ 3,621,729 $ 3,294,895
Working capital 352,338 420,830 194,509 94,150 132,169
Long-term debt 989,650 921,704 602,993 382,775 554,092
Capitalized lease obligations 140,957 130,050 129,265 129,573 110,919
Stockholders' equity 2,419,456 2,247,018 1,952,523 1,687,893 1,389,379
- --------------------------------------------------------------------------------------------------------------------------------
Other Year End Statistics:
Number of stores 878 826 764 720 676
Number of employees:
Total 94,000 88,000 80,000 76,000 75,000
Full-time equivalents 76,000 71,000 66,000 60,000 58,000
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -In fiscal 1994 the Company adopted the provisions of Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." The total cumulative effect of this accounting change (net of $10.6
million in tax benefits) decreased net earnings by $17.0 million or $0.07 per
basic and diluted share.
- -In fiscal 1993 a $29.9 million nonrecurring charge was recorded to cover the
settlement of a lawsuit and interest expense included a reduction of $9.7
million due to the successful resolution of a tax issue for which interest
expense had previously been accrued.
Page 26
<PAGE>
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>
1997
Sales $3,607,541 $3,680,509 $3,612,032 $3,789,429 $14,689,511
Gross profit 928,706 931,960 974,080 1,047,078 3,881,824
Net earnings 109,266 109,440 123,405 174,703 516,814
Earnings per share:
Basic 0.44 0.44 0.50 0.71 2.09
Diluted 0.43 0.44 0.50 0.71 2.08
- -----------------------------------------------------------------------------------------------
1996
Sales $3,343,941 $3,481,131 $3,375,771 $3,575,835 $13,776,678
Gross profit 858,615 900,966 868,337 937,412 3,565,330
Net earnings 112,377 120,712 106,424 154,266 493,779
Earnings per share:
Basic 0.45 0.48 0.42 0.61 1.96
Diluted 0.44 0.48 0.42 0.61 1.95
- ----------------------------------------------------------------------------------------------
</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:
<TABLE>
<CAPTION>
(Dollars in thousands except
per share data - Unaudited) First Second Third Fourth Year
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Net earnings $ (6,726) $ (6,800) $ (2,326) $ 10,120 $ (5,732)
Basic and diluted earnings per share (0.03) (0.03) (0.01) 0.04 (0.02)
- -------------------------------------------------------------------------------------------------------
1996
Net earnings $ (7,651) $ (7,651) $ (3,331) $ 9,304 $ (9,329)
Basic and diluted earnings per share (0.03) (0.03) (0.01) 0.03 (0.04)
- -------------------------------------------------------------------------------------------------------
</TABLE>
- -In 1997, due to rounding and different periods used to compute weighted average
outstanding shares, the sum of the quarterly earnings per share does not equal
the annual earnings per share.
Page 27
<PAGE>
<TABLE>
<CAPTION>
Stockholders' Information
<S> <C> <C>
Address: Annual Meeting: When directing correspondence to
ALBERTSON'S, INC. The 1998 Annual Meeting of Stockholders ChaseMellon at the address shown,
General Offices will be held at 10:00 a.m. Mountain stockholders are reminded to include
250 Parkcenter Boulevard Daylight Time on Friday, May 22, 1998, a reference to Albertson's, Inc.
P.O. Box 20 in the Eyries Room, Boise Centre on the
Boise, Idaho 83726 Grove, 850 Front Street, Boise, Idaho. Company Profile Available:
Telephone: (208) 395-6200 A copy of the Company Profile, which
Dividend Investment Plan: contains a discussion of our core
Auditors: The Company's Dividend Investment Plan values, including equal opportunity,
Deloitte & Touche LLP allows stockholders owning at least 15 environmental quality and community
Boise, Idaho shares of record to automatically invest support, as well as statistical
the quarterly dividends or to purchase information about the Company, is
Stock Transfer Agent and Registrar: additional shares under the Plan with available to stockholders, without
ChaseMellon Shareholder voluntary cash payments. More information charge, upon request to the Corporate
Services, L.L.C. may be obtained from ChaseMellon at Secretary of Albertson's, Inc.
Shareholder Relations Department (800) 982-7649 or from the Corporate
P.O. Box 3315 Secretary of Albertson's, Inc. Form 10-K Available:
South Hackensack, New Jersey 07606 A copy of Form 10-K Annual Report filed
Telephone: (800) 356-2017 Information Contact: with the Securities and Exchange
Internet Address: Information on individual accounts or on Commission for Albertson's, Inc. fiscal
www.chasemellon.com procedures necessary to make changes in year ended January 29, 1998, is available
an account is provided by ChaseMellon at to stockholders, without charge, upon
Stockholders of Record: (800) 356-2017 between the hours of 8:00 request to the Corporate Secretary of
There were 18,0000 stockholders a.m. and 8:00 p.m., Eastern Time, after a Albertson's, Inc.
of record at March 18, 1998. stockholder identifies his or her
account by providing a taxpayer
identification number, the registration
name on the securities and the address of
record.
</TABLE>
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>
1997 37 30 1/2 38 11/16 31 7/8 37 3/4 32 3/4 48 5/8 36 5/16 48 5/8 30 1/2
1996 39 3/8 33 3/4 42 3/4 36 1/8 43 3/4 33 3/4 38 33 3/4 43 3/4 33 3/4
1995 32 1/2 29 7/8 31 5/8 27 1/4 34 5/8 28 5/8 35 5/8 30 3/8 35 5/8 27 1/4
</TABLE>
Cash dividends declared per share:
<TABLE>
<CAPTION>
First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
1997 $ 0.16 $ 0.16 $ 0.16 $ 0.16 $ 0.64
1996 0.15 0.15 0.15 0.15 0.60
1995 0.13 0.13 0.13 0.13 0.52
</TABLE>
In March 1998 the Board of Directors increased the regular quarterly cash
dividend 6.3% to $0.17 per share from $0.16 per share, for an annual rate of
$0.68 per share. The new quarterly rate will be paid on May 25, 1998, to
stockholders of record on May 1, 1998.
Page 28
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statements
numbered 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799 and 33-59803 on
Form S-8 and Registration Statements numbered 33-49329, 333-2837 and 333-41793
on Form S-3 of Albertson's, Inc. and subsidiaries of our report dated March 18,
1998, appearing in and incorporated by reference in the Annual Report on Form
10-K of Albertson's, Inc. and subsidiaries for the year ended January 29, 1998.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boise, Idaho
April 9, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALBERTSON'S
ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED JANUARY 29, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-1998
<PERIOD-START> JAN-31-1997
<PERIOD-END> JAN-29-1998
<CASH> 108,083
<SECURITIES> 0
<RECEIVABLES> 122,223
<ALLOWANCES> 1,200
<INVENTORY> 1,308,578
<CURRENT-ASSETS> 1,627,857
<PP&E> 5,205,636
<DEPRECIATION> 1,822,263
<TOTAL-ASSETS> 5,218,590
<CURRENT-LIABILITIES> 1,275,519
<BONDS> 1,130,607
0
0
<COMMON> 245,736
<OTHER-SE> 2,173,720
<TOTAL-LIABILITY-AND-EQUITY> 5,218,590
<SALES> 14,689,511
<TOTAL-REVENUES> 14,689,511
<CGS> 10,807,687
<TOTAL-COSTS> 10,807,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,563
<INCOME-PRETAX> 826,903
<INCOME-TAX> 310,089
<INCOME-CONTINUING> 516,814
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 516,814
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ALBERTSON'S QUARTERLY REPORTS TO STOCKHOLDERS FOR THE QUARTERS ENDED OCTOBER 30,
1997, JULY 31, 1997, AND MAY 1, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> JAN-29-1998 JAN-29-1998 JAN-29-1998
<PERIOD-START> JAN-31-1997 JAN-31-1997 JAN-31-1997
<PERIOD-END> OCT-30-1997 JUL-31-1997 MAY-01-1997
<CASH> 98,312 16,156 50,353
<SECURITIES> 0 0 0
<RECEIVABLES> 103,084 104,065 102,309
<ALLOWANCES> 1,000 1,000 1,000
<INVENTORY> 1,244,315 1,151,920 1,151,822
<CURRENT-ASSETS> 1,539,929 1,367,702 1,397,828
<PP&E> 5,037,324 4,870,598 4,742,978
<DEPRECIATION> 1,757,902 1,692,218 1,629,392
<TOTAL-ASSETS> 5,015,875 4,746,187 4,689,856
<CURRENT-LIABILITIES> 1,254,175 1,155,960 1,242,001
<BONDS> 1,120,664 1,015,286 784,813
0 0 0
0 0 0
<COMMON> 245,574 245,961 250,133
<OTHER-SE> 2,034,904 1,966,509 2,046,525
<TOTAL-LIABILITY-AND-EQUITY> 5,015,875 4,746,187 4,689,856
<SALES> 10,900,082 7,288,050 3,607,541
<TOTAL-REVENUES> 10,900,082 7,288,050 3,607,541
<CGS> 8,065,336 5,427,384 2,678,835
<TOTAL-COSTS> 8,065,336 5,427,384 2,678,835
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 61,243 38,855 19,314
<INCOME-PRETAX> 551,436 352,524 177,093
<INCOME-TAX> 209,325 133,818 67,827
<INCOME-CONTINUING> 342,111 218,706 109,266
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 342,111 218,706 109,266
<EPS-PRIMARY> 1.38 0.88 0.44
<EPS-DILUTED> 1.37 0.87 0.43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ALBERTSON'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED JANUARY 30, 1997,
AND QUARTERLY REPORTS TO STOCKHOLDERS FOR THE QUARTERS ENDED OCTOBER 31, 1996,
AUGUST 1, 1996, AND MAY 2, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> JAN-30-1997 JAN-30-1997 JAN-30-1997 JAN-30-1997
<PERIOD-START> FEB-02-1996 FEB-02-1996 FEB-02-1996 FEB-02-1996
<PERIOD-END> JAN-30-1997 OCT-31-1996 AUG-01-1996 MAY-02-1996
<CASH> 90,865 62,393 76,740 54,048
<SECURITIES> 0 0 0 0
<RECEIVABLES> 99,364 101,675 97,188 92,449
<ALLOWANCES> 1,000 1,250 1,250 1,250
<INVENTORY> 1,201,067 1,179,493 1,034,864 1,042,891
<CURRENT-ASSETS> 1,475,923 1,429,253 1,298,174 1,277,358
<PP&E> 4,622,655 4,506,082 4,347,889 4,183,795
<DEPRECIATION> 1,568,015 1,513,973 1,468,028 1,419,721
<TOTAL-ASSETS> 4,714,633 4,586,233 4,349,181 4,216,655
<CURRENT-LIABILITIES> 1,055,093 1,057,071 989,178 1,045,022
<BONDS> 1,051,754 1,003,592 879,956 768,062
0 0 0 0
0 0 0 0
<COMMON> 250,690 251,523 251,980 251,956
<OTHER-SE> 1,996,328 1,908,970 1,859,091 1,775,797
<TOTAL-LIABILITY-AND-EQUITY> 4,714,633 4,586,233 4,349,181 4,216,655
<SALES> 13,776,678 10,200,843 6,825,072 3,343,941
<TOTAL-REVENUES> 13,776,678 10,200,843 6,825,072 3,343,941
<CGS> 10,211,348 7,572,925 5,065,491 2,485,326
<TOTAL-COSTS> 10,211,348 7,572,925 5,065,491 2,485,326
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 64,569 46,065 29,962 14,957
<INCOME-PRETAX> 794,847 550,264 377,778 182,135
<INCOME-TAX> 301,068 210,751 144,689 69,758
<INCOME-CONTINUING> 493,779 339,513 233,089 112,377
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 493,779 339,513 233,089 112,377
<EPS-PRIMARY> 1.96 1.35 0.93 0.45
<EPS-DILUTED> 1.95 1.34 0.92 0.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ALBERTSON'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED FEBRUARY 1, 1996,
AND IS QUALIFIED IN ITS ENTIREETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1996
<PERIOD-START> FEB-03-1995
<PERIOD-END> FEB-01-1996
<CASH> 69,113
<SECURITIES> 0
<RECEIVABLES> 99,590
<ALLOWANCES> 1,250
<INVENTORY> 1,030,246
<CURRENT-ASSETS> 1,283,002
<PP&E> 4,063,378
<DEPRECIATION> 1,365,896
<TOTAL-ASSETS> 4,135,911
<CURRENT-LIABILITIES> 1,088,493
<BONDS> 732,258
0
0
<COMMON> 251,919
<OTHER-SE> 1,700,604
<TOTAL-LIABILITY-AND-EQUITY> 4,135,911
<SALES> 12,585,034
<TOTAL-REVENUES> 12,585,034
<CGS> 9,371,736
<TOTAL-COSTS> 9,371,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,633
<INCOME-PRETAX> 758,501
<INCOME-TAX> 293,540
<INCOME-CONTINUING> 464,961
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 464,961
<EPS-PRIMARY> 1.84
<EPS-DILUTED> 1.83
</TABLE>
