FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended January 29, 1994.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________________ to
________________
Commission file number 1-5392
AMERICAN STORES COMPANY
_____________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 87-0207226
________________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
709 East South Temple
Salt Lake City, Utah 84102
_______________________________________ ___________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 539-0112
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
________________________________ __________________________________
Common Stock ($1 par value) Chicago Stock Exchange, Inc.
and New York Stock Exchange, Inc.
Preferred Share Purchase Rights Pacific Stock Exchange, Inc.
Registered on: Philadelphia Stock Exchange, Inc.
7 1/4% Convertible Subordinated Notes New York Stock Exchange, Inc.
due 2001
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
________________________________
None
Indicate by checkmark 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
___ ___
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. X
___
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 25, 1994:
Common Stock, $1 Par Value -- $3,060,419,015. Adjusted to reflect the two-
for-one stock split declared March 21, 1994, payable April 21, 1994 to
shareholders of record April 7, 1994.
_________________________________________
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of March 25, 1994:
Common Stock, $1 Par Value -- 142,646,140. Adjusted to reflect the two-for-
one stock split declared March 21, 1994, payable April 21, 1994 to
shareholders of record April 7, 1994.
_________________________________________
Documents Incorporated by Reference:
Portions of the registrant's 1993 Annual Report to its shareholders for the
fiscal year ended January 29, 1994 (the "Annual Report"), to the extent
specifically incorporated herein, are incorporated by reference into Parts I,
II and IV.
Portions of the Annual Proxy Statement to be filed with the Securities and
Exchange Commission relating to the registrant's Annual Meeting of
Shareholders to be held on June 21, 1994 (the "Proxy Statement"), to the
extent specifically incorporated herein, are incorporated by reference into
Part III.
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
TABLE OF CONTENTS
PART I
Page Number*
Item 1 Business...................................................... 4
Item 2 Properties.................................................... 6
Item 3 Legal Proceedings............................................. 9
Item 4 Submission of Matters to a Vote of Security Holders........... 9
PART II
Item 5 Market for the Registrant's Common Equity and
Related Shareholder Matters................................ 9
Item 6 Selected Financial Data....................................... 9
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9
Item 8 Financial Statements and Supplementary Data................... 9
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................ 9
PART III
Item 10 Directors and Executive Officers of the Registrant........... 9
Item 11 Executive Compensation.......................................12
Item 12 Security Ownership of Certain Beneficial Owners
and Management.............................................12
Item 13 Certain Relationships and Related Transactions...............13
PART IV
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................13
Signatures...................................................14
* These page numbers refer to the paper copy of the 10-K and not the
EDGAR version.
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
PART I
Item 1 Business
________
History
American Stores Company, a Delaware corporation (the "Company")
traces its roots to 1939 with the purchase of four drug stores in
Utah, Idaho and Montana and was incorporated in Delaware in 1965
under the name of Skaggs Drug Centers, Inc. The Company grew
initially through the acquisition of additional drug stores and,
from 1969 through 1977, through a partnership with Albertson's that
developed food and drug combination stores. In 1979 the Company, in
order to enhance its food retailing capabilities, acquired American
Stores Company, including Acme Markets, and adopted the American
Stores Company name. In 1984 Jewel Companies, Inc. was acquired by
the Company, adding Jewel Food Stores, Star Market and the Osco and
Sav-on drug stores. In 1988, the Company acquired Lucky Stores,
Inc. which currently operates stores in California and Nevada.
After each acquisition mentioned above, the Company has reviewed the
consolidated group and disposed of selected stores and divisions to
reduce debt as well as to focus on growth opportunities available to
the remaining entities. Past major dispositions have included the
Rea & Derick drug chain, two groups of food stores in Arizona, Kash
n' Karry, Buttrey Food and Drug, Alpha Beta Company, 74 Jewel Osco
combination stores in Texas, Florida, Oklahoma and Arkansas and 51
Osco drug stores in the intermountain region.
Operations
The Company is principally engaged in a single industry segment, the
retail sale of food and drug merchandise. The Company's principal
food operations are Lucky Stores Northern California Division and
Southern California Division and Jewel Osco - New Mexico (the
"western food operations") and Acme Markets, Jewel Food Stores and
Star Market (the "eastern food operations"). American Stores
Company's drug stores operate under the Osco Drug and Sav-on names.
The Company is one of the nation's leading food and drug retailers.
American Stores Company operates stand-alone food and drug stores,
plus combination food/drug store units. The Company's operations
are generally located in major metropolitan markets where it holds
leading market positions (first or second in overall market share).
At year-end 1993, the Company operated 1,695 stores in 27 states
including 148 Jewel Osco combination stores which are jointly
operated by Osco Drug and Jewel Food Stores and are counted as two
separate stores.
<PAGE>
<TABLE>
The following is a summary of stores by state and operating company:
Store Count by State and Operating Company
Lucky Stores Lucky Stores Jewel
State Northern CA Southern CA Jewel Osco- Acme Food Star Osco
Division Division New Mexico Markets Stores Market Drug Sav-on Total
_____ _____________ ____________ __________ _______ _________ ______ ____ ______ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona 63 63
Arkansas 6 6
California 186 219 231 636
Delaware 16 16
Illinois 176 212 388
Indiana 9 73 82
Iowa 2 19 21
Kansas 24 24
Kentucky 2 2
Maine 1 1
Maryland 12 12
Massachusetts 32 44 76
Michigan 6 6 12
Minnesota 2 2
Missouri 28 28
Montana 8 8
Nebraska 11 11
Nevada 20 5 18 43
New Hampshire 15 15
New Jersey 87 87
New Mexico 11 11
New York 4 4
North Dakota 6 6
Pennsylvania 128 128
South Dakota 3 3
Vermont 1 1
Wisconsin 9 9
_______________________________________________________________________________________
Total Stores 186 239 11 247 193 32 538 249 1,695
=======================================================================================
</TABLE>
See "Item 2 Properties" for additional information concerning
properties of the registrant.
As a result of its geographic diversity, the Company tailors the
merchandising and advertising of its stores to the demographics in
each area it serves. The merchandise sold by the Company's retail
food and combination food/drug stores includes most food items and
non-food items, such as prescription drugs, health and beauty aids
and sundry merchandise.
<PAGE>
PART I - (Continued)
Item 1 Business - (Continued)
______________________
The combination stores, and many of the food stores, include
specialty departments such as delicatessens, bakeries, seafood
departments and pharmacies. The Company operates private label
merchandising programs, including such private label brands as "Lady
Lee" at Lucky Stores, "Lancaster Brand" meats at Acme Markets,
"Osco" at Osco and Sav-on stores and the budget line of "Econo-Buy".
The Company also sells "President's Choice" label products on an
exclusive geographic basis at Acme Markets, Jewel Food Stores,
Star Market and Lucky Stores Northern and Southern California
Divisions.
Competition
In all areas in which the Company operates, the business is highly
competitive, with competition from local and national supermarket
and drug store chains as well as independent stores. Competition
also exists from such retailers as convenience stores, warehouse
stores and membership or club stores. Some of the Company's largest
competitors in various regions are Vons, Safeway, Raleys, Ralphs,
Thriftway, Walgreens, Thrifty, Dominicks and Pathmark. Principal
competitive factors in the industry include store location, the
price and quality of products, breadth of selection, quality of
service and store image, including cleanliness and promotions.
The Company's business is characterized by narrow profit margins
and, accordingly, its successful financial performance depends
primarily on its ability to maintain relatively high sales
volume and control operating costs. The Company's geographic
diversity allows it to reduce the risk that competitive pressures
in individual markets may have on its overall operating results.
The Company's food and drug stores collectively operate in 9 of
the 25 largest U.S. metropolitan areas (Source: Bureau of the
Census) and hold a leading market position in each. These market
areas include: Los Angeles-Long Beach, Chicago, Philadelphia,
Boston, Riverside-San Bernardino, San Diego, Anaheim-Santa Ana,
Phoenix and Oakland.
Seasonality
The Company is subject to effects of seasonality, with food and drug
store sales higher in the Company's fourth fiscal quarter than other
quarters in connection with the holiday season. The Company's drug
store sales also tend to be somewhat higher in the fourth fiscal
quarter in connection with the increase in cold and flu occurrences
during this quarter.
Employees
At year-end 1993, the Company had approximately 127,000 full and
part-time employees. Approximately 75% of the Company's employees
are covered by collective bargaining agreements negotiated with
local unions affiliated with one of seven different international
unions. There are approximately 120 such agreements, typically
having three-year terms, with some recently renewed contracts
having terms up to five years. Accordingly, the Company
renegotiates a significant number of these agreements every year.
Incorporation by Reference
The section entitled "Fiscal Year" in the Notes to Consolidated
Financial Statements on page 38, the section entitled "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" on pages 26 through 31 and the section entitled
"Contingencies" on page 49 of the Annual Report are incorporated
herein by reference.
<PAGE>
PART I - (Continued)
Item 2 Properties
__________
The Company categorizes its retail stores into the following types:
grocery, expanded grocery, combination food/drug, drug stores and
other. At year-end 1993, the Company operated 600 grocery stores,
112 expanded grocery stores, 341 combination stores, 632 stand-alone
drug stores and 10 stand-alone pharmacies. The 341 combination
stores include 148 Jewel Osco combination stores which are jointly
operated by Jewel Food Stores and Osco Drug and are counted as two
separate stores.
Combination stores are stores with 40,000 or more square feet,
include a pharmacy department and have an expanded selection of
food, drug and general merchandise. Combination stores average
approximately 54,800 square feet. Expanded grocery stores are
stores in excess of 40,000 square feet that do not meet combination
store criteria. Expanded grocery stores average approximately
47,700 square feet. Grocery stores average approximately 27,700
square feet. Stand-alone drug stores average approximately 19,000
square feet.
The Company owns approximately 24% of its retail locations; the
remaining retail locations are leased under capitalized or operating
leases. The Company also owns, or controls through long-term
leases, its distribution, warehouse and maintenance support
facilities. At year-end 1993, owned property with a net book value
of approximately $199.1 million collateralized loans secured by real
estate of approximately $112.8 million. The Company currently
finances new construction of owned stores through internally
generated funds and borrowings under existing credit facilities.
Throughout the country, the Company leases and owns distribution
centers, fleet maintenance shops and warehouses for merchandise such
as dry grocery, produce, frozen foods and general merchandise.
These facilities support the Company's retail outlets and do not
have significant sales to unrelated third parties. The Company
also owns or leases office space, owns land for future development
and operates dairies, bakeries and other manufacturing or processing
facilities that supply its retail outlets with a variety of private
label merchandise. Manufacturing facilities operate at levels of
production required to meet the demands of customers at the
Company's retail locations.
<PAGE>
PART I - (Continued)
____________________
Item 2 Properties - (Continued)
________________________
At year-end 1993, the store counts by various types of stores and
total square footage were as follows:
Store Count by Type of Stores
____________________________________________
Expanded
Grocery Grocery Combination Drug Other Total
_______ _______ ___________ ____ _____ _____
Eastern Food Operations:
Acme Markets 219 9 19 247
Jewel Food Stores (1) 39 6 148 193
Star Market 25 2 5 32
___ ___ ___ ___ ___ ___
Total Eastern Operations 283 17 172 472
Western Food Operations:
Lucky Stores - North 161 23 2 186
Lucky Stores - South 156 72 11 239
Jewel Osco - New Mexico 8 3 11
___ ___ ___ ___ ___ ___
Total Western Operations 317 95 21 3 436
Drug Store Operations:
Osco Drug (1) 148 380 10 538
Sav-on 249 249
___ ___ ___ ___
Total Drug Operations 148 629 10 787
___ ___ ___ ___ ___ _____
Total 600 112 341 632 10 1,695
=== === === === === =====
(1) Combination stores represent the food and drug sides of Jewel
Osco combination stores jointly operated by Jewel Food Stores
and Osco Drug.
Total Square Feet
_________________
Retail Distribution, Warehouse
(In thousands) Locations and Maintenance Facilities
_________ __________________________
Eastern Food Operations:
Acme Markets 6,906 2,911
Jewel Food Stores 6,541 1,746
Star Market 1,120 649
______ _____
Total Eastern Operations 14,567 5,306
Western Food Operations:
Lucky Stores - North 5,887 2,318
Lucky Stores - South 8,758 2,859
Jewel Osco - New Mexico 555 0
______ _____
Total Western Operations 15,200 5,177
Drug Store Operations:
Osco Drug 9,577 1,206
Sav-on 5,115 1,018
______ ______
Total Drug Operations 14,692 2,224
Non-retail Operations 0 224
______ ______
Total 44,459 12,931
====== ======
<PAGE>
PART I - (Continued)
____________________
Item 2 Properties - (Continued)
________________________
The Company operated 15 manufacturing or processing facilities at
year-end 1993 as follows:
Type of Facility Number of Plants and Locations
________________ ______________________________
Bakery 4-Melrose Park, Illinois; San Leandro, California;
Buena Park, California; San Diego, California
Dairy 4-Sacramento, California; San Leandro, California;
Buena Park, California; Escondido, California
Photo Finishing 3-Braintree, Massachusetts; Elgin, Illinois;
Burbank, California
Ice Cream 1-Buena Park, California
Fixture Shop 1-Payson, Utah
Meat Processing 1-Buena Park, California
Deli Packaging 1-San Leandro, California
See also Item 1, Business, for Additional Information on Properties
of the Registrant.
The section entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition" on pages 26 through
31 of the Annual Report is incorporated herein by reference.
Item 3 Legal Proceedings
_________________
The sections entitled "Legal Proceedings" on page 48 and "Retirement
Plans" on page 47 of the Annual Report are incorporated herein by
reference.
Item 4 Submission of Matters to a Vote of Security Holders
___________________________________________________
There were no matters submitted to the security holders of the
Company for a vote during the quarter ended January 29, 1994.
<PAGE>
PART II
_______
Item 5 Market for the Registrant's Common Equity and Related Shareholder
Matters
_________________________________________________________________
The section entitled "Common Stock Market Prices and Dividends" on
the bottom of page 2 of the Annual Report is incorporated herein by
reference.
Item 6 Selected Financial Data
_______________________
The section entitled "Selected Financial Data" on page 25 of the
Annual Report is incorporated herein by reference.
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
_________________________________________________________________
The section entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition" on pages 26 through
31 of the Annual Report is incorporated herein by reference.
Item 8 Financial Statements and Supplementary Data
___________________________________________
The Company's consolidated financial statements and related notes
thereto, together with the Report of Independent Auditors and the
selected quarterly financial data of the Company presented on
pages 32 to 50 of the Annual Report are incorporated herein by
reference.
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
________________________________________________________________
None.
PART III
________
Item 10 Directors and Executive Officers of the Registrant
__________________________________________________
There is hereby incorporated by reference the information under the
captions "Election of Directors", "Information Regarding the
Nominees Standing for Election in 1994 as Class I Directors" and
"Information Regarding Directors who are not Nominees for Election
and Whose Terms Continue Beyond 1994" in the Proxy Statement.
In addition to the information regarding Directors and Executive
Officers set forth above, the following represents information
regarding Executive Officers of the registrant as of March 22,
1994.
Officer Offices Held Age
_____________________________________________________________________________
Lawrence A. Del Santo Senior Executive Vice President and Chief 60
Operating Officer-Food of the registrant
since March 1993; Chairman and Chief
Executive Officer of Lucky Stores, Inc.
from April 1989; Chief Operating Officer
from 1987 to April 1989 and President from
1987 to August 1991.
David L. Maher Senior Executive Vice President and Chief 55
Operating Officer-Drug of the registrant
since March 1993; Chairman of the Board and
Chief Executive Officer of American Drug
Stores, Inc. from September 1990 and
President from March 1990; prior thereto,
Vice President of American Drug Stores'
Intermountain region from February 1985 to
March 1990.
Kent T. Anderson Executive Vice President and General Manager - 40
American Stores Properties, Inc. since March
1993; prior thereto, General Counsel of the
registrant from February 1987 and Executive
Vice President of the registrant from February
1989; Senior Vice President of the registrant
from June 1988 to February 1989; Vice President
of the registrant from February 1987 to June
1988; Assistant Secretary of the registrant
since April 1989; Secretary of the registrant
from January 1989 to April 1989; Assistant
Secretary of the registrant from February 1987
to January 1989.
Teresa Beck Executive Vice President Finance of the 39
registrant since March 1994, and Assistant
Secretary since June 1989. Executive Vice
President Administration from March 1992 to
March 1994; Senior Vice President Finance and
Assistant Treasurer of the registrant from
June 1989 to March 1992; Vice President,
Controller and Assistant Secretary of the
registrant from February 1987 to June 1989.
Richard E. Fredericksen Executive Vice President National Buying and 53
Logistics of the registrant since June 1993.
Executive Vice President and General Manager
of the Northern California Division of Lucky
Stores from August 1991 to June 1993; Senior
Vice President Statewide Marketing of Lucky
Stores,Inc. from September 1989 to August 1991;
Senior Vice President Sales and Merchandising
of Lucky Stores, Inc. from prior to 1988 to
September 1989.
Donald B. Holbrook Executive Vice President and Chief Legal 69
Officer of the registrant since October 1989.
Director of the registrant from June 1990 to
June 1993. Shareholder and President of the
law firm of Jones, Waldo, Holbrook & McDonough,
P.C., from prior to 1988 to October 1989.
Director, Kearns-Tribune Corporation. Trustee,
Utility Shareholder Association of Utah.
Kathleen E. McDermott Executive Vice President and General Counsel 44
since June 1993; partner of the law firm of
Collier, Shannon, Rill & Scott from prior to
1988 to June 1993.
Scott Bergeson Senior Vice President - Human Resources of 56
the registrant since January 1993; prior
thereto, Senior Vice President Benefits
Administration from February 1989; Chairman
of the Board of American Drug Stores, Inc.
from February 1987 to February 1989.
James R. Clark Senior Vice President Strategy and Change 50
Management of the registrant since December
1993. Senior Vice President Marketing and
Planning, Lucky Stores, Inc. from August 1991
to December 1993; Senior Vice President Sales
and Merchandising, Southern California
Division of Lucky Stores, Inc. from August
1989 to August 1991; Senior Vice President
Administration, Southern California Division
of Lucky Stores, Inc. from prior to 1988
until August 1989.
Jack Lunt Senior Vice President of the registrant 49
Assistant General Counsel and Secretary
since April 1989; since March 1993 and prior
thereto, Vice President from April 1989 to
March 1993. Shareholder from 1974 and associate
from 1969 in the law firm of Jones, Waldo,
Holbrook & McDonough.
Francis J. Raucci Senior Vice President Chief Labor Counsel 57
of the registrant since December 1993.
Senior Vice President and Assistant General
Counsel from April 1989 to December 1993.
Director of Alpha Beta Company from February
1989 to December 1990. Vice President of
Alpha Beta Company from December of 1990
to June 1991; Senior Vice President from
April 1986 to December 1990.
Neal J. Rider Senior Vice President and Treasurer of the 32
registrant since March 1994. Vice President
and Controller from September 1992 to March
1994; Vice President and Assistant Treasurer
from May 1990 to September 1992; prior thereto,
Director - Corporate Banking from June 1989
to May 1990; prior thereto, Manager -
Accounting of the registrant from January
1987 to June 1989.
Stanley R. Whitcomb Senior Vice President Information Technology 49
of the registrant since September 1993; Senior
Vice President Information Systems from
November 1989 to September 1993; Vice
President Information Systems of Lucky
Stores, Inc. from May 1989 to November 1989;
Staff Vice President Systems Development from
August 1988 to May 1989; Director Systems
Development from September 1987 to August 1988.
Bradley M. Vierig Vice President and Controller, Financial 36
Accounting of the registrant since March 1994.
Vice President and Assistant Treasurer from
August 1992 to March 1994; Vice President
Corporate Financial Planning from March 1990
to July 1992; Director of Financial Planning
from May 1989 to March 1990. Senior Manager
of Ernst & Young from prior to 1988 to May 1989.
Item 11 Executive Compensation
______________________
There is hereby incorporated by reference the information under
the captions "Directors' Compensation", "Executive Compensation",
"Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Value", "Long-Term Incentive Awards", "Long-
Term Incentive Plans-Awards in Last Fiscal Year", "Compensation
Committee Interlocks and Insider Participation" and "Other
Information Pertaining to Directors and Executive Officers" in the
Proxy Statement.
Item 12 Security Ownership of Certain Beneficial Owners and Management
______________________________________________________________
There is hereby incorporated by reference the information under
the caption "Beneficial Ownership of Securities" in the Proxy
Statement.
Item 13 Certain Relationships and Related Transactions
______________________________________________
There is hereby incorporated by reference the information under
the captions "Information Regarding the Nominees Standing for
Election in 1994 as Class I Directors", "Information Regarding
Directors who are not Nominees for Election and Whose Terms
Continue Beyond 1994", "Compensation Committee Interlocks and
Insider Participation" and "Other Information Pertaining to
Directors and Executive Officers" in the Proxy Statement. In
addition, see Schedule II under Item 14(a)(2) below.
PART IV
_______
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
_______________________________________________________________
(a) Document List
(1) Financial Statements
The response to this portion of Item 14 is submitted as
a separate section of this report on page 18.
(2) Financial Statement Schedules
The response to this portion of Item 14 and Item 14(d)
is submitted as a separate section of this report on
page 18.
(3) Exhibits
The response to this portion of Item 14 and Item 14(c)
is submitted as a separate section of this report on
pages 19 through 21.
(b) Reports on Form 8-K filed during the last quarter of 1993
The Company filed a Form 8-K on March 7, 1994 listing under
Items 5 and 7 the Company's fiscal 1993 earnings.
For the purposes of complying with the amendments to the rules
governing Form S-8 under the Securities Act of 1933, the Company
hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Company's Registration
Statements on Form S-8 Nos. 2-71032; 2-54101; 33-25613; 2-94235;
33-48203; 33-48204; 33-08801; 33-32150; 2-51401 and on Forms S-3
Nos. 33-41640, 33-41641 and 33-52331.
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.
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
Signatures
__________
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Stores Company
_______________________
By (Signature and Title): /s/Donald B. Holbrook April 28, 1994
__________________________________
Donald B. Holbrook,
Executive Vice President
and Chief Legal Officer
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 and on the date indicated.
/s/Victor L. Lund Director, President and April 28, 1994
___________________________ Chief Executive Officer
Victor L. Lund
/s/Teresa Beck Executive Vice President, April 28, 1994
___________________________ Finance and
Teresa Beck Assistant Secretary
(Principal Financial Officer)
/s/Bradley M. Vierig Vice President and April 28, 1994
___________________________ Controller, Financial Accounting
Bradley M. Vierig (Chief Accounting Officer)
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
Signatures
__________
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 and on the date indicated.
/s/L. S. Skaggs Director and April 28, 1994
_____________________________________ Chairman of the Board
L. S. Skaggs
/s/Henry I. Bryant Director April 28, 1994
_____________________________________
Henry I. Bryant
/s/Louis H. Callister Director April 28, 1994
_____________________________________
Louis H. Callister
/s/Arden B. Engebretsen Director April 28, 1994
_____________________________________
Arden B. Engebretsen
/s/James B. Fisher Director April 28, 1994
_____________________________________
James B. Fisher
/s/Fernando R. Gumucio Director April 28, 1994
_____________________________________
Fernando R. Gumucio
/s/Leon G. Harmon Director April 28, 1994
_____________________________________
Leon G. Harmon
/s/Victor L. Lund Director, President April 28, 1994
_____________________________________ and Chief Executive
Victor L. Lund Officer
/s/John E. Masline Director April 28, 1994
_____________________________________
John E. Masline
/s/Michael T. Miller Director April 28, 1994
_____________________________________
Michael T. Miller
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
Signatures (Continued)
______________________
/s/L. Tom Perry Director April 28, 1994
_____________________________________
L. Tom Perry
/s/Barbara S. Preiskel Director April 28, 1994
_____________________________________
Barbara S. Preiskel
/s/J. L. Scott Director April 28, 1994
_____________________________________
J. L. Scott
/s/Aline W. Skaggs Director April 28, 1994
_____________________________________
Aline W. Skaggs
/s/Arthur K. Smith Director April 28, 1994
______________________________________
Arthur K. Smith
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
Items 14(a), (c) and (d)
List of Financial Statement Schedules and Exhibits
Certain Financial Statement Schedules
Certain Exhibits
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
Item 14(a)(1) - Financial Statements
____________________
The following consolidated financial statements of the
registrant and its subsidiaries, included in the Annual
Report, are incorporated by reference in Item 8:
Consolidated Statements of Earnings for the fiscal years
1993, 1992 and 1991;
Consolidated Balance Sheets for the years ended 1993, 1992
and 1991;
Consolidated Statements of Cash Flows for the fiscal years
1993, 1992 and 1991;
Consolidated Statements of Shareholders' Equity for the
fiscal years 1993, 1992 and 1991;
Notes to Consolidated Financial Statements.
Item 14(a)(2) - Supplementary Data and Financial Statement Schedules
____________________________________________________
The supplementary data entitled "Quarterly Results
(unaudited)" on page 50 of the Annual Report is
incorporated by reference in Item 8. In response to
Item 14(d), the following consolidated financial statement
schedules of the registrant and its subsidiaries are
submitted as a separate section of this report:
Schedule II - Amounts Receivable From Related Parties and
Underwriters, Promoters and Employees Other
Than Related Parties;
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment
In response to Item 14(d), the following consolidated
financial statement schedules of the registrant and its
subsidiaries included in the Annual Report are
incorporated herein by reference:
Schedule IX - Short-term Borrowings (in the section
entitled "Financial Condition" on pages 29
through 31 and the section entitled "Debt"
on pages 40 and 41 of the Annual Report);
Schedule X - Supplementary Income Statement Information
(in the section entitled "Advertising
Expense" on page 39 of the Annual Report).
Each of the other items for which provision
is made are less than 1% of total sales and
therefore, are not required to be
disclosed.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
INDEX TO EXHIBITS
Item 14(a)(3) - Exhibits
In response to Item 14(c), the following exhibits are submitted as a separate
section of this report:
3. Articles of Incorporation and By-Laws
a. The restated Certificate of Incorporation of American
Stores Company is incorporated herein by reference to
the Registrant's Form 8-K filed with the Commission on
July 1, 1991.
b. The By-Laws of American Stores Company as amended
effective June 22, 1993.
10. Material Contracts.
a. Credit Agreement dated as of September 1, 1988 among the
Company, the banks listed therein and Morgan
Guaranty Trust Company of New York, as Agent, together
with Amendment No. 1 through the form of Amendment
No. 5 thereto, is incorporated herein by reference as
filed with the Commission on July 12, 1991 as Exhibit
10.1 to form 8.
b. Retirement Plan for Non-Employee Directors is
incorporated herein by reference as previously filed
with the Commission on July 12, 1991 as Exhibit 10.2 to
Form 8. (1)
c. Non-Employee Directors' Deferred Fee Plan is
incorporated herein by reference as previously filed
with the Commission on July 12, 1991 as Exhibit 10.3 to
Form 8. (1)
d. Supplemental Executive Retirement Plan of 1987 as
amended December 15, 1992 incorporated herein by
reference as filed with the Commission on April 29, 1993
as Exhibit 10.d to Form 10-K. (1)
e. 1989 Stock Option and Stock Award Plan is incorporated
herein by reference to the Registrant's Registration
Statement on Form S-8 (Registration No. 33-32150). (1)
f. 1985 Stock Option and Stock Award Plan is incorporated
herein by reference to the Registrant's Registration
Statement on Form S-8 (Registration No. 33-08801). (1)
g. 1975 Employees' Stock Option Plan is incorporated herein
by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 2-54101). (1)
h. Agreements between Lucky Stores, Inc. and Lawrence A.
Del Santo are incorporated herein by reference as
previously filed with the Commission on July 12, 1991 as
Exhibit 10.11 to Form 8. (1)
______________________
(1) Management contract or compensatory plan filed pursuant to
Item 14(c) of this Form 10-K.
<PAGE>
Item 14(a)(3) - Exhibits (continued)
i. Agreement between the Company and Donald B. Holbrook is
incorporated by reference as previously filed with the
Commission on July 12, 1991 as Exhibit 10.9 to Form 8.
(1)
j. Agreement between Jewel Companies, Inc. and Michael T.
Miller incorporated herein by reference as filed with
the Commission on April 29, 1993 as Exhibit 10.k to Form
10-K. (1)
k. Agreement between the Company and Alexander L. Searl.
(1)
l. American Stores Company Key Executive Stock Purchase
Incentive Plan is incorporated herein by reference to
Exhibit A of the Registrant's 1992 Proxy Statement as
filed with the Commission on May 7, 1992. (1)
m. American Stores Company Board of Directors Stock
Purchase Incentive Plan is incorporated herein by
reference to Exhibit B of the Registrant's 1992 Proxy
Statement as filed with the Commission on May 7, 1992.
(1)
n. Description of Key Management Annual Bonus Plan of
American Stores Company for fiscal 1994. (1)
o. Description of Key Management Long-Term Performance
Incentive Plan (for 1994 through 1996) of American
Stores Company. (1)
11. Calculation of earnings per share.
12. Computation of ratio of earnings to fixed charges.
13. Exhibit 13 consists of pages 25 to 50 and page 2 of American
Stores Company's 1993 Annual Report to Shareholders which
are numbered as pages 1 to 30 of Exhibit 13. Such report,
except to the extent incorporated hereby by reference, has
been sent to and furnished for the information of the
Securities and Exchange Commission only and is not to be
deemed filed as part of this Annual Report on Form 10-K.
The references to the pages incorporated by reference are to
the printed Annual Report. The references to the pages of
Exhibit 13 are as follows: Item 1--pages 17, 3 through 10,
and 28 through 29; Item 2--pages 3 through 10; Item 3--pages
26 through 28; Item 5--page 1; Item 6--page 2; Item 7--pages 3
through 10; Item 8--pages 11 through 30; and Item 14--page
30, pages 7 through 10, 19 through 21, and 18.
22. Subsidiaries of the Registrant.
24. Consent of independent auditors with regard to the financial
statements of the registrant for the year-ended 1993.
28. Securities and Exchange Commission Form 11-K for American
Stores Retirement Estates for the year ended December 31,
1993.
All other exhibits for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instruction or are inapplicable, and therefore have been
omitted.
___________________
(1) Management contract or compensatory plan filed pursuant to
Item 14(c) of this Form 10-K.
<PAGE>
<TABLE>
AMERICAN STORES COMPANY
FORM 10-K
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
Balance at
Beginning Amounts Amounts Currently Not Currently
Name of Debtor of Period Additions Collected Written Off Due Due
______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
1993
Notes Receivable:
K. Anderson $ 1,046,250 $ 121,704 $ (40,500) $ $ $ 1,127,454
T. Beck 1,046,250 121,704 (40,500) 1,127,454
S. Bergeson 1,046,250 121,704 (40,500) 1,127,454
W. Bolton 1,046,250 121,704 (40,500) 1,127,454
R. Davis 1,046,250 121,704 (40,500) 1,127,454
L. Del Santo 3,836,250 446,247 (148,500) 4,133,997
R. Fredericksen 1,046,250 121,704 (40,500) 1,127,454
R. Goodspeed 2,615,625 304,259 (101,250) 2,818,634
R. Hermanns 1,046,250 121,704 (40,500) 1,127,454
J. Horn 1,046,250 121,704 (40,500) 1,127,454
V. Lund 6,975,000 811,358 (270,000) 7,516,358
J. Lunt 1,046,250 121,704 (40,500) 1,127,454
D. Maher 3,836,250 446,247 (148,500) 4,133,997
S. Mannschreck 1,046,250 121,704 (40,500) 1,127,454
K. McDermott 0 1,473,052 (18,000) 1,455,052
F. Raucci 1,046,250 121,704 (40,500) 1,127,454
M. Scholtens 1,046,250 121,704 (40,500) 1,127,454
A. Searl 1,046,250 121,704 (40,500) 1,127,454
A. Stewart 3,836,250 446,247 (148,500) 4,133,997
S. Whitcomb 1,046,250 121,704 (40,500) 1,127,454
A. White 1,046,250 121,704 (40,500) 1,127,454
R. Wilhelm 0 1,473,052 (18,000) 1,455,052
L. Callister 348,750 40,591 (6,975) 382,366
A. Engebretsen 348,750 40,591 (6,975) 382,366
J. Fisher 348,750 40,591 (6,975) 382,366
F. Gumucio 348,750 40,591 (6,975) 382,366
L. Harmon 348,750 40,591 (6,975) 382,366
J. Masline 348,750 40,591 (6,975) 382,366
B. Preiskel 348,750 40,591 (6,975) 382,366
A. Smith 435,625 29,008 (8,713) 455,920
H. Bryant 65,344 4,351 (1,307) 68,388
___________ __________ __________ __________ __________ ___________
$39,735,344 $7,543,518 ($1,519,095) $ 0 $ 0 $45,759,767
=========== ========== ========== ========== ========== ===========
1992
Notes Receivable:
K. Anderson $ 0 $ 1,046,250 $ $ $ $ 1,046,250
T. Beck 0 1,046,250 1,046,250
S. Bergeson 0 1,046,250 1,046,250
W. Bolton 0 1,046,250 1,046,250
R. Davis 0 1,046,250 1,046,250
L. Del Santo 0 3,836,250 3,836,250
R. Fredericksen 0 1,046,250 1,046,250
G. Glancey 0 1,046,250 (1,046,250) 0
R. Goodspeed 0 2,615,625 2,615,625
R. Hermanns 0 1,046,250 1,046,250
J. Horn 0 1,046,250 1,046,250
V. Lund 0 6,975,000 6,975,000
J. Lunt 0 1,046,250 1,046,250
D. Maher 0 3,836,250 3,836,250
S. Mannschreck 0 1,046,250 1,046,250
F. Raucci 0 1,046,250 1,046,250
M. Scholtens 0 1,046,250 1,046,250
Balance at
Beginning Amounts Amounts Currently Not Currently
Name of Debtor of Period Additions Collected Written Off Due Due
______________________________________________________________________________________________________
A. Searl 0 1,046,250 1,046,250
A. Stewart 0 3,836,250 3,836,250
S. Whitcomb 0 1,046,250 1,046,250
A. White 0 1,046,250 1,046,250
L. Callister 0 348,750 348,750
A. Engebretsen 0 348,750 348,750
J. Fisher 0 348,750 348,750
F. Gumucio 0 348,750 348,750
L. Harmon 0 348,750 348,750
J. Masline 0 348,750 348,750
B. Preiskel 0 348,750 348,750
A. Smith 0 435,625 435,625
H. Bryant 0 65,344 65,344
___________ ___________ ___________ __________ __________ ___________
TOTAL $ 0 $40,781,594 $(1,046,250) $ 0 $ 0 $39,735,344
=========== =========== =========== ========== ========== ===========
Note:
____
The notes receivable shown above are the principal balances of full-recourse notes which were issued
to key executives and directors of the registrant as part of the American Stores Company Key Executive
Stock Purchase Plan and the American Stores Company Board of Directors Stock Purchase Plan. The notes
accrue interest at rates varying from 5.3 to 7.0%. Accrued interest, net of any required payments, is
added annually to the principal balance of the notes. The section entitled "Stock Purchase Incentive
Plans" on pages 44 and 45 of the Annual Report is incorporated by reference.
Balance at
Beginning Amounts Amounts Currently Not Currently
Name of Debtor of Period Additions Collected Written Off Due Due
_____________________________________________________________________________________________________
1991
Notes Receivable:
J.L. Benner $ 32,164 $ $ (32,164) $ $ 0 $
___________ ___________ ___________ __________ __________ ___________
TOTAL $ 32,164 $ 0 $ (32,164) $ 0 $ 0 $ 0
=========== =========== =========== ========== ========== ===========
Note:
____
The note receivable shown above, which bore interest at a rate of 6% per annum and was secured by a
second deed of trust on the residence, was for a term of five years and provided for annual principal
payments.
</TABLE>
<PAGE>
<TABLE>
AMERICAN STORES COMPANY
FORM 10-K
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Balance at Other Changes Balance
Beginning Additions Retirements Add (Deduct) at End
Description of Period at Cost or Sales (Describe) of Period
______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
(In thousands)
1993
Land $ 496,594 $ 49,593 $ (4,861) $ 70 (a) $ 541,396
Buildings 1,017,665 94,259 (16,431) 14,244 (a) 1,109,737
Fixtures and equipment 1,887,063 327,049 (126,377) 5,199 (a) 2,092,934
Leasehold improvements 546,108 122,884 (5,766) (9,103) (a) 654,123
__________ ________ _________ _______ __________
Property, plant and equipment $3,947,430 $593,785 $(153,435) $10,410 $4,398,190
========== ======== ========= ======= ==========
Property under capital leases $ 208,312 $ 0 $ (2,791) $ 0 $ 205,521
========== ======== ========= ======= ==========
1992 (b)
Land $ 574,338 $ 5,603 $ (81,339) $(2,008) (d) $ 496,594
Buildings 1,121,226 62,481 (168,495) 2,453 (c) 1,017,665
Fixtures and equipment 1,919,779 257,936 (289,070) (1,582) (c) 1,887,063
Leasehold improvements 540,481 60,086 (55,596) 1,137 (c) 546,108
__________ ________ _________ _______ __________
Property, plant and equipment $4,155,824 $386,106 $(594,500) $ 0 $3,947,430
========== ======== ========= ======= ==========
Property under capital leases $ 238,423 $ 0 $ (30,111) $ 0 $ 208,312
========== ======== ========= ======= ==========
1991 (b)
Land $ 572,462 $ 12,784 $ (10,908) $ 0 $ 574,338
Buildings 1,034,487 61,407 8,863 16,469 (c) 1,121,226
Fixtures and equipment 1,922,251 232,497 (235,778) 809 (c) 1,919,779
Leasehold improvements 561,289 48,252 (51,782) (17,278) (c) 540,481
__________ ________ _________ _______ __________
Property, plant and equipment $4,090,489 $354,940 $(289,605) $ 0 $4,155,824
========== ======== ========= ======= ==========
Property under capital leases $ 274,021 $ 185 $ (33,861) $(1,922) $ 238,423
========== ======== ========= ======= ==========
Notes:
_____
(a) Adjustments primarily related to a reclassification of investment property and other assets
to property, plant and equipment.
(b) Restated to reflect the adoption of Statement of Financial Accounting Standards No. 109,
"Accounting For Income Taxes," as if effective at the beginning of fiscal 1989.
(c) Reclassifications
<PAGE>
AMERICAN STORES COMPANY
FORM 10-K
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
Additions
Balance at Charged to Other Changes Balance
Beginning Costs and Retirements Add (Deduct) at End
Description of Period Expenses or Sales (Describe) of Period
______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
(In thousands)
1993
Buildings $ 285,045 $ 41,989 $ (6,881) $ 3,104 (b) $ 323,257
Fixtures and equipment 1,009,229 220,883 (103,156) (1,238) (b) 1,125,718
Leasehold improvements 211,583 36,827 (4,424) 1,189 (b) 245,175
__________ ________ _________ _______ ___________
Property, plant and equipment $1,505,857 $299,699 $(114,461) $ 3,055 $1,694,150
========== ======== ========= ======= ==========
Property under capital leases $ 99,689 $ 11,551 $ (2,846) $ 0 $ 108,394
========== ======== ========= ======= ==========
Total depreciation and amortization $311,250
========
1992 (c)
Buildings $ 286,681 $ 41,954 $ (43,775) $ 185 (d) $ 285,045
Fixtures and equipment 999,523 207,031 (197,357) 32 (d) 1,009,229
Leasehold improvements 199,449 34,782 (22,431) (217) (d) 211,583
__________ ________ _________ _______ ___________
Property, plant and equipment $1,485,653 $283,767 $(263,563) $ 0 $1,505,857
========== ======== ========= ======= ==========
Property under capital leases $ 113,520 $ 11,543 $ (25,374) $ 0 $ 99,689
========== ======== ========= ======= ==========
Total depreciation and amortization $295,310
========
1991 (c)
Buildings $ 219,990 $ 44,527 $ 13,897 $ 8,267 (d) $ 286,681
Fixtures and equipment 957,199 215,454 (173,818) 688 (d) 999,523
Leasehold improvements 181,959 37,861 (11,416) (8,955) (d) 199,449
__________ ________ _________ _______ ___________
Property, plant and equipment $1,359,148 $297,842 $(171,337) $ 0 $1,485,653
========== ======== ========= ======= ==========
Property under capital leases $ 120,471 $ 13,233 $ (20,053) $ (131) $ 113,520
========== ======== ========= ======= ==========
Total depreciation and amortization $311,075
========
Notes:
______
(a) The annual provisions for depreciation and amortization have been computed
principally in accordance with the following ranges of rates:
Buildings 2.5% to 5.0%
Fixtures and equipment 10% to 25%
Leasehold improvements Generally amortized over term of related leases
and property under capital leases (Principally 4.0% to 6.7%)
(b) Adjustments primarily related to a reclassification of investment property and other assets
to property, plant and equipment.
(c) Restated to reflect the adoption of Statement of Financial Accounting Standards No.109,
"Accounting For Income Taxes," as if effective at the beginning of fiscal 1989.
(d) Reclassifications
</TABLE>
Exhibit 3.B
RESTATED BY-LAWS OF
AMERICAN STORES COMPANY
ARTICLE I
OFFICES
Section 1.01. Registered Office. The registered office of the Company
shall be at 100 West Tenth Street, Wilmington, County of New Castle,
Delaware, until otherwise established by a vote of a majority of the Board of
Directors in office, and a statement of such change is filed in the manner
provided by statute.
Section 1.02. Other Offices. The Company may also have offices at
such other places within or without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Company
requires.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Place of Meeting. All meetings of the stockholders of
the Company shall be held in Wilmington, Delaware, or at such other place
within or without the State of Delaware as shall be designated by the Board
of Directors in the notice of such meeting.
Section 2.02. Annual Meeting. The Board of Directors may fix the date
and time of the annual meeting of the stockholders, but if no such date and
time is fixed by the Board, the meeting for any calendar year shall be held
at such time and date as the Board of Directors may determine and at said
meeting the stockholders then entitled to vote shall elect by written ballot
directors and shall transact such other business as may properly be brought
before the meeting.
Section 2.03. Special Meetings. Except as provided in Section 4.08 of
the Company's Certificate of Incorporation, special meetings of the
stockholders of the Company for any purpose or purposes for which meetings
may lawfully be called, may be called at any time for any purpose or purposes
by the Board of Directors or by any person or Committee expressly so
authorized by the Board of Directors and by no other person or persons. At
any time, upon written request of any person or persons who have duly called
a special meeting, which written request shall state the purpose or purposes
of the meeting, it shall be the duty of the Secretary to fix the date of the
meeting to be held at such date and time as the Secretary may fix, not less
than ten nor more than sixty days after the receipt of the request, and to
give due notice thereof. If the Secretary shall neglect or refuse to fix the
time and date of such meeting and give notice thereof, the person or persons
calling the meeting may do so.
Section 2.04. Notice of Meetings. Written notice of the place, date
and hour of every meeting of the stockholders, whether annual or special,
shall be given to each stockholder of record entitled to vote at the meeting
not less than ten nor more than sixty days before the date of the meeting.
Every notice of a special meeting shall state the purpose or purposes
thereof.
Section 2.05. Quorum, Manner of Acting and Adjournment. The holders
of a majority of the stock issued and outstanding (not including treasury
stock) and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute, by the
Certificate of Incorporation or by these by-laws. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present or represented. At any such adjourned meeting, at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. When a quorum is present at any meeting, the vote of the holders of
the majority of the stock having voting power present in person or
represented by proxy shall decide any questions brought before such meeting,
unless the question is one upon which, by express provision of the applicable
statute, the Company's Certificate of Incorporation or these by-laws, a
different vote is required in which case such express provision shall govern
and control the decision of such question. Except upon those questions
governed by the aforesaid express provisions, the stockholders present in
person or by proxy at a duly organized meeting can continue to do business
until adjournment, notwithstanding withdrawal of enough stockholders to leave
less than a quorum.
Section 2.06. Organization. At every meeting of the stockholders the
Chairman of the Board, if there be one, or in the case of vacancy in office
or absence of the Chairman of the Board, such person as may be designated by
the Board of Directors, or, in the absence of any such person, one of the
following persons present in the order stated: the Vice Chairmen of the
Board, if there be one in their order of rank and seniority; the President;
the Executive Vice Presidents and the Vice Presidents, in their order of rank
and seniority; or a Chairman chosen by the stockholders entitled to cast a
majority of the votes which all stockholders present in person or by proxy
are entitled to cast, shall act as Chairman, and the Secretary, or, in his
absence, an Assistant Secretary, or in the absence of both the Secretary and
Assistant Secretaries, a person appointed by the Chairman shall act as
Secretary.
Section 2.07. Voting: Proxies. Each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or by proxy for
each share of capital stock having voting power registered in his name on the
books of the Company on the record date for such meeting. All elections of
directors shall be by written ballot. The vote upon any other matter need
not be by ballot. No proxy shall be voted after three years from its date,
unless the proxy provides for a longer period. Every proxy shall be executed
in writing by the stockholder or by his duly authorized attorney-in-fact and
filed with the Secretary of the Company. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or
any provisions in the proxy to the contrary, but the revocation of a proxy
shall not be effective until notice thereof has been given to the Secretary
of the Company. A duly executed proxy shall be irrevocable if it states that
it is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Company generally. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of
such death or incapacity is given to the Secretary of the Company.
Section 2.08. Voting Lists. The officer who has charge of the stock
ledger of the Company shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting. The list shall be arranged in alphabetical order showing the
address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.09. Inspectors of Election. In advance of any meeting of
stockholders the Board of Directors may appoint inspectors of election, who
need not be stockholders, to act at such meeting or any adjournment thereof.
If inspectors of election are not so appointed, the Chairman of any such
meeting may, and upon the demand of any stockholder or his proxy at the
meeting and before voting begins, shall appoint inspectors of election. The
number of inspectors shall be either one, two or three, as determined, in the
case of inspectors appointed upon demand of a stockholder, by stockholders
present entitled to cast a majority of the votes which all stockholders
present are entitled to cast thereon. No person who is a candidate for
office shall act as an inspector. In case any person appointed as inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment made by the Board of Directors in advance of the convening of the
meeting, or at the meeting by the Chairman of the meeting.
If inspectors of election are appointed as aforesaid, they shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, receive votes or ballots, hear
and determine all challenges and questions in any way arising in connection
with the right to vote, count and tabulate all votes, determine the result,
and do such acts as may be proper to conduct the election or vote with
fairness to all stockholders. If there be three inspectors of election, the
decision, act or certificate of a majority shall be effective in all respects
as the decision, act or certificate of all.
On request of the Chairman of the meeting or of any stockholder or his
proxy, the inspectors shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Powers. The management of the Company shall be under
the direction of the Board of Directors; and all powers of the Company,
except those specifically reserved or granted to the stockholders by statute,
the Certificate of Incorporation or these by-laws, are hereby granted to and
vested in the Board of Directors.
Section 3.02. Number, Term of Office and Qualification. The Board of
Directors shall consist of such number of directors, not less than five or
more than twenty, as may be determined from time to time by the Board of
Directors, subject to the provisions of Section 10.02 of the Certificate of
Incorporation. The Board is divided into three classes, Class I, Class II
and Class III. Such classes shall be as nearly equal in number of directors
as possible. Each director shall serve for a term ending on the third annual
meeting following the annual meeting at which such directors were elected;
provided, however that the directors first elected to Class I shall serve for
a term ending at the annual meeting next following the end of the fiscal year
1981, the directors first elected to Class II shall serve for a term ending
at the second annual meeting next following the end of the fiscal year 1981,
and the directors first elected to Class III shall serve for a term ending at
the third annual meeting next following the end of the fiscal year 1981. The
foregoing notwithstanding, each director shall serve until his successor
shall have been duly elected and qualified, unless he shall resign, become
disqualified, disabled or shall otherwise be removed.
At each annual election, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors, the Board shall designate one or more directorships whose term
then expires as directorships of another class in order more nearly to
achieve equality of number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly
equal in number of directors as possible, in the event of any change in the
authorized number of directors, each director then continuing to serve as
such shall nevertheless continue as director of the class of which he is a
member until the expiration of his current term, or his prior death,
resignation or removal. If any newly created directorship may, consistent
with the rule that the three classes shall be as nearly equal in number of
directors as possible, be allocated to one or two or more classes, the Board
shall allocate it to that of the available classes whose term of office is
due to expire at the earliest date following such allocation. All directors
of the Company shall be natural persons of full age, but need to be residents
of Delaware or stockholders of the Company.
Section 3.03. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be
filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall
hold office until the event of their death, resignation or removal. If there
are no directors in office, then an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute
less than a majority of the whole Board of Directors (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
Section 3.04. Resignations. Any director of the Company may resign at
any time by giving written notice to the Chairman of the Board or the
Secretary of the Company. Such resignation shall take effect at the date of
the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 3.05. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if there be one, or, in the case of a
vacancy in the office or absence of the Chairman of the Board, one of the
following officers present in the order stated: the Vice Chairmen of the
Board, if there be one in their order of rank and seniority; the President;
the Executive Vice Presidents or Vice Presidents in their order of rank and
seniority; or a Chairman chosen by a majority of the directors present, shall
preside, and the Secretary, or in his absence, an Assistant Secretary, or in
the absence of the Secretary and the Assistant Secretaries, any person
appointed by the Chairman of the meeting, shall act as Secretary.
Section 3.06. Place of Meeting. The Board of Directors may hold its
meetings, both regular and special, at such place or places within or without
the State of Delaware as the Chairman of the Board or the Board of Directors
may from time to time determine, or as may be designated in the notice
calling the meeting.
Section 3.07. Organization Meeting. Immediately after each annual
election of directors or other meeting at which the entire Board of Directors
is elected, the newly elected Board of Directors shall meet for the purpose
of organization, election of officers, and the transaction of other business,
at the place where said election of directors was held. Notice of such
meeting need not be given. Such organization meeting may be held at any
other time or place which shall be specified in a notice given as hereinafter
provided for special metings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 3.08. Regular Meetings. Regular meetings of the Board of
Directors shall be held without notice at such time and at such place as
shall be determined from time to time by the Board of Directors. Notice of
any regular meeting shall be given in the manner prescribed for special
meetings of the Board of Directors.
Section 3.09. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board of
Directors, the President or on the written request of three or more of the
directors. Notice of each such meeting shall be given to each director in
writing, or by telephone personally, at least 24 hours before the time at
which the meeting is to be held. Each such notice shall state the time and
place of the meeting to be so held.
Section 3.10. Quorum, Manner of Acting and Adjournment. At all
meetings of the Board of Directors a majority of the total number of
directors shall constitute a quorum for the transaction of business and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If
a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present.
Unless otherwise restricted by the Certificate of Incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or Committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee as the case may be.
Section 3.11. Executive and Other Committees. The Board of Directors
may, by resolution adopted by a majority of the whole Board, designate an
Executive Committee and one or more other committees, each committee, other
than the Executive Committee, to consist of two or more directors who shall
be nominated by the Nominating Committee and approved by a majority of the
whole Board. The Board may designate one or more directors as alternate
members of any committee who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member
and the alternate or alternates, if any, designated for such member of any
committee, the member or members thereof present at any meeting and not
disqualified, whether or not he or they constitute a quorum, may unanimously
appoint another director to act at the meeting in place of any such absent or
disqualified member.
The Executive Committee shall consist of three or more directors, one
of whom shall be the Chairman of the Board of the Company. Meetings of the
Executive Committee shall be called by the Chairman of the Board. In the
absence of the Chairman of the Executive Committee, the members of the
Executive Committee shall designate one of such members to be the presiding
member. Except as otherwise provided in this Section, the Executive
Committee shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Company and may authorize the seal of the Company to be affixed to all papers
which may require it. Any other committee of the Board shall have and
exercise the authority of the Board of Directors to the extent provided in
the resolution designating the committee.
The Nominating Committee shall consist of four or more directors. The
Chairman of the Board of Directors of the Company shall serve on the
Nominating Committee except as such times as the Chairman of the Board of
Directors elects not to serve on the Nominating Committee. The Chairman of
the Board of Directors of the Company shall also serve as the Chairman of the
Nominating Committee, unless he has designated another member of the
Nominating Committee to serve as the Chairman thereof, in which case such
other director shall serve as the Chairman of the Nominating Committee until
the Chairman of the Board of Directors assumes the Chairmanship of the
Nominating Committee or designates another Nominating Committee member as the
Chairman thereof. The Nominating Committee shall have the power to make
nominations to the Board of Directors, for those persons to be designated
management nominees for election as directors and for those persons to be
elected as officers of the Company by the Board of Directors.
No committee of the Board of Directors shall have the authority of the
Board in reference to:
(1) Declaring any dividend;
(2) Authorizing the issuance of any stock of the Company;
(3) Amending the Certificate of Incorporation;
(4) Adopting an agreement of merger or consolidation;
(5) Recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Company's property and assets;
(6) Recommending to the stockholders a dissolution of the Company or
a revocation of a dissolution; or
(7) Amending the by-laws of the Company.
The provisions of Section 3.09 shall be applicable to all committees of
the Board.
At all meetings of any committee of the Board of Directors, a majority
of the members of the committee shall constitute a quorum for the transaction
of business and the act of a majority, but not less than three in the case of
the Executive or Nominating Committee, of the members of the committee
present at any meeting thereof at which there is a quorum shall be the act of
the committee, except as may be otherwise specifically provided for by
statute or by the Certificate of Incorporation. If a quorum is not present
at any meeting of any committee of the Board, the committee members present
thereat may adjourn the meeting from time to time without notice other than
announcement at the meeting, until a quorum shall be present.
Each committee shall maintain a record of its activities and report
thereon periodically to the Board of Directors. The Executive Committee
shall cause its minutes to be recorded in a book kept for that purpose, and
shall have said minutes submitted for approval to the Board of Directors at
the Board meeting next following the meeting or meetings of the Executive
Committee.
Section 3.12. Interested Directors or Officers. No contract or
transaction between the Company and one or more of its directors or officers,
or between the Company and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board or committee
thereof which authorized the contract or transaction, or solely because his
or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority
of the disinterested directors, even though the disinterested directors be
less than a quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Company as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 3.13. Compensation. Each director who is not also a full-time
active employee of the Company or any subsidiary thereof shall be paid such
compensation for his or her services as a director and shall be reimbursed
for such expenses as may be fixed by the Board of Directors.
ARTICLE IV
NOTICE, WAIVERS, MEETINGS
Section 4.01. Notice, What Constitutes. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
by-laws, written notice is required to be given to any directors or
stockholder, such notice may be given to such person, either personally or by
sending a copy thereof through the mail, or by telegraph, facsimile
transmission, charges prepaid, to his address appearing on the books of the
Company. If the notice is sent by mail, by telegraph or by private delivery
service, it shall be deemed to have been given to the person entitled thereto
when deposited in the United States mail or with a telegraph office or
private delivery service for transmission to such person.
Section 4.02. Waivers of Notice. Whenever any written notice is
required to be given under the provisions of the Certificate of
Incorporation, these by-laws, or by statute, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the stockholders, directors, or members of
a committee of directors need be specified in any written waiver of notice of
such meeting.
Attendance of a person, either in person or by proxy, at any meeting,
shall constitute a waiver of notice of such meeting, except when a person
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting was not
lawfully called or convened.
Section 4.03. Conference Telephone Meetings.
(a) Directors and Officers of the Company may not participate in a
meeting of the Board or of a Committee of the Board or of the Real Estate or
Benefit Plans Committees of the Company by means of conference telephone or
similar communications equipment except in an emergency.
(b) An emergency is defined as a sudden unexpected happening rendering
it absolutely necessary to obtain immediate Board action and there is
insufficient time to convene a meeting of the Board where all members could
be present in person. In the event of such an emergency, to be determined in
the sole and absolute discretion of the Chief Executive Officer of the
Company, one or more directors may participate in such a meeting by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation
in a meeting pursuant to this section shall constitute presence in person at
such meeting.
ARTICLE V
OFFICERS
Section 5.01. Number, Qualifications and Designation. The officers of
the Company shall be chosen by the Board of Directors and shall be a Chairman
of the Board, a President, one or more Executive Vice Presidents and Vice
Presidents, a Secretary, a Treasurer, and such other officers as may be
elected in accordance with the provisions of Section 5.03 of this Article.
One person may hold more than one office. Officers may be, but need not be
directors or stockholders of the Company.
Section 5.02. Election and Term of Office. The officers of the
Company, except those elected by delegated authority pursuant to Section 5.03
of this Article, shall be elected annually by the Board of Directors, and
each such officer shall hold his office until his successor shall have been
elected and qualified, or until his earlier resignation or removal.
Section 5.03. Subordinate Officers, Committees and Agents. The Board
of Directors may, from time to time, elect such other officers, employees or
other agents as it deems necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as are provided
in these by-laws, or as the Board of Directors may from time to time
determine. The Board of Directors may delegate to any officer or committee
the power to elect subordinate officers and to retain or appoint employees or
other agents, or committees thereof, and to prescribe the authority and
duties of such subordinate officers, committees, employees or other agents.
Section 5.04. Resignations. Any officer or agent may resign at any
time by giving written notice to the Board of Directors, or to the Chairman
of the Board or the Secretary of the Company. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5.05. Removal. Any officer, committee, employee or other
agent of the Company may be removed, either for or without cause, by the
Board of Directors or other authority which elected or appointed such
officer, committee or other agent whenever in the judgment of such authority
the best interests of the Company will be served thereby.
Section 5.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled
by the Board of Directors or by the officer or committee to which the power
to fill such office has been delegated pursuant to Section 5.03 of this
Article, as the case may be, and if the office is one for which these by-laws
prescribe a term, shall be filled for the unexpired portion of the term.
Section 5.07. General Powers. All officers of the Company, as between
themselves and the Company, shall, respectively, have such authority and
perform such duties in the management of the property and affairs of the
Company as may be determined by these by-laws, or in the absence of
controlling provisions in the by-laws, as may be provided by resolution of
the Board of Directors.
Section 5.08. Corporate Authority. The Chairman of the Board shall,
subject to the control of the Board of Directors, have general and active
supervision of the affairs, business, officers and employees of the Company.
He shall sign, execute, and acknowledge, in the name of the Company, deeds,
mortgages, bonds, contracts or other instruments, authorized by the Board of
Directors, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors, or these by-laws, to some
other officer or agent of the Company. By virtue of his office, the Chairman
of the Board shall be a member of all committees of the Board of Directors or
of the Company except as otherwise specifically provided. He shall, from
time to time, in his discretion or at the order of the Board, submit to the
Board reports of the operations and affairs of the Company. He shall also
perform such other duties and have such other powers as may be assigned to
him from time to time by the Board of Directors.
Section 5.09. The Chairman and Vice Chairmen of the Board. The
Chairman of the Board shall preside at all meetings of the stockholders and
of the Board of Directors, and shall perform such other duties as may from
time to time be assigned to him by the Board of Directors. The Vice Chairmen
of the Board, if there be one, in their order of rank and seniority, shall
perform such duties as may from time to time be assigned to them by the Board
of Directors, by the Chairman of the Board or these by-laws.
Section 5.10. The President. The President shall perform such duties
as from time to time may be assigned to him by the Board of Directors or by
the Chairman of the Board.
Section 5.11. The Vice Presidents. The Company may have one or more
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents having
such duties as from time to time may be determined by the Board of Directors
or by the Chairman of the Board.
Section 5.12. The Secretary. The Secretary shall keep full minutes of
all meetings of the stockholders and of the Board of Directors; shall be ex-
officio Secretary of the Board of Directors; shall attend all meetings of the
stockholders and of the Board of Directors; shall record all the votes of
the stockholders and of the directors and the minutes of the meetings of the
stockholders and of the Board of Directors and of committees of the Board in
a book or books to be kept for that purpose. The Secretary shall give, or
cause to be given, notices of all meetings of the stockholders of the Company
and of the Board of Directors; shall be the custodian of the seal of the
Company and see that it is affixed to all documents to be executed on behalf
of the Company under its seal; shall have responsibility for the custody and
safekeeping of all permanent records and other documents of the Company; and,
in general, shall perform all duties incident to the office of Secretary and
such other duties as may be prescribed by the Board of Directors or by the
Chairman of the Board, under whose supervision he shall be. The Board of
Directors may elect one or more Assistant Secretaries to perform such duties
as shall from time to time be assigned to them by the Board of Directors or
the Chairman of the Board.
Section 5.13. The Treasurer. The Treasurer shall have or provide for
the custody of all funds, securities and other property of the Company; shall
collect and receive or provide for the collection or receipt of money earned
by or in any manner due to or received by the Company; shall deposit or cause
to be deposited all said moneys in such banks or other depositories as the
Board of Directors may from time to time designate; shall make disbursements
of Company funds upon appropriate vouchers; shall keep full and accurate
accounts of transactions of his office in books belonging to the Company;
shall, whenever so required by the Board of Directors, the Executive
Committee or an Audit Committee, render an accounting showing his
transactions as Treasurer, and the financial condition of the Company; and,
in general, shall discharge any other duties as may from time to time be
assigned to him by the Board of Directors. The Board of Directors may elect
one or more Assistant Treasurers to perform the duties of the Treasurer as
shall from time to time be assigned to them by the Board of Directors or the
Treasurer.
Section 5.14. The Controller. The Board of Directors may appoint a
Controller who shall maintain full and accurate records of all assets and
liabilities and transactions of the Company, see that adequate audits thereof
are currently and regularly made and, in conjunction with other officers and
department heads, initiate and enforce measures and procedures whereby the
business of the Company shall be conducted with maximum safeguards,
efficiency and economy. He shall make all such records available for
examination when so required by the Board of Directors, the Executive
Committee, or an Audit Committee. He shall perform such other duties and
have such other obligations as may be prescribed by the Board of Directors or
by the Chairman of the Board.
Section 5.15. Officer's Bonds. Any officer shall give a bond for the
faithful discharge of his duties in such sum, if any, and with such surety or
sureties as the Board of Directors shall require. The Company may obtain
such bonds at its expense as the Board of Directors shall require.
Section 5.16. Compensation. The compensation of the officers and
agents of the Company elected by the Board of Directors shall be fixed from
time to time by the Board of Directors or by such committee as may be
designated by the Board of Directors to fix salaries or other compensation of
officers.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.
Section 6.01. Issuance. The certificates for stock of the Company
shall be numbered and registered in the stock ledger and transfer books or
equivalent records of the Company as they are issued. They shall be signed
by the Chairman of the Board, the President, an Executive Vice President or a
Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer, and shall bear the corporate seal, which
may be a facsimile, engraved or printed. Any of or all the signatures upon
such certificate may be a facsimile, engraved or printed if such certificate
of stock is signed or countersigned by a transfer agent or by a registrar,
which signature may also be a facsimile. In case any officer, transfer agent
or registrar who has signed, or whose facsimile signature has been placed
upon any share certificate shall have ceased to be such officer, transfer
agent or registrar before the certificate is issued, it may be issued with
the same effect as if he were such officer, transfer agent or registrar at
the date of its issue.
Section 6.02. Transfer. Transfers of shares of stock of the Company
shall be made on the books of the Company upon surrender of the certificates
therefor, endorsed by the person named in the certificate or by attorney
lawfully constituted in writing. No transfer shall be made inconsistent with
the provisions of the Uniform Commercial Code, Article 8 of Title 5A of the
Delaware Code, and its amendments and supplements.
Section 6.03. Stock Certificates. Stock certificates of the Company
shall be in such form as provided by statute and approved by the Board of
Directors. The stock record books and the blank stock certificate books
shall be kept by the Secretary or by any agency designated by the Board of
Directors for that purpose.
Section 6.04. Lost, Stolen, Destroyed or Mutilated Certificates. The
Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the Company
alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate
or certificates, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to give the Company a bond in such sum as it may direct as indemnity against
any claim that may be made against the Company with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 6.05. Record Holder of Shares. The Company shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
Section 6.06. Determination of Stockholders of Record. In order that
the Company may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action.
If no record date is fixed:
(1) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held.
(2) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
Only such stockholders as shall be stockholders on the record date
fixed or determined as aforesaid shall be entitled to notice of or to vote at
such meeting or adjournment, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful acction. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE VII
INDENMIFICATION OF DIRECTORS, OFFICERS, ETC.
DELETED IN ITS ENTIRETY.
ARTICLE VIII
INSURANCE
DELETED IN ITS ENTIRETY.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Corporate Seal. The corporate seal of the Company shall
have inscribed thereon the name of the Company, the year of its incorporation
and the words "Corporate Seal, Delaware". The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or otherwise reproduced.
Section 9.02. Checks. All checks, notes, bills of exchange or other
orders in writing shall be signed by such person or persons as the Board of
Directors, or officer or officers authorized by resolution of the Board of
Directors may, from time to time, designate.
Section 9.03. Contracts. Except as otherwise provided in these by-
laws, the Board of Directors may authorize any officer or officers including
the Chairman and Vice Chairmen of the Board of Directors, or any agent or
agents, to enter into any contract or to execute or deliver any instrument on
behalf of the Company and such authority may be general or confined to
specific instances.
Section 9.04. Audit. The Board of Directors shall cause the accounts
and records of the Company and its subsidiaries to be examined and audited by
a firm of independent certified public accountants at least once each year.
The Board of Directors each year shall cause a report of the financial
condition of the Company and its subsidiaries as of the closing date of the
preceding fiscal year to be prepared. Such report shall be in such form as
shall be approved by the Board of Directors and shall be examined and audited
by a firm of independent certified public accountants.
Section 9.05. Inspection. The books, accounts and records of the
Company shall be open for inspection in person by any member of the Board of
Directors at all times.
Section 9.06. Amendment of By-Laws. These by-laws shall not be made,
repealed, altered, amended or rescinded by the stockholders of the Company
except by the vote of not less than 80% of the total outstanding shares of
common stock as well as a majority of the total outstanding shares of common
stock not held by a Related Person (as defined in Article Thirteenth of the
Certificate of Incorporation) and/or its affiliates. Nothing contained
herein shall detract from the authority of the Board of Directors to make,
alter or repeal the by-laws of the Company (as set forth in Article 10.03(a)
of the Certificate of Incorporation).
Exhibit 10.K
TO: Alexander L. Searl DATE: March 25, 1994
FROM: Victor L. Lund
SUBJECT: CONTINUING EMPLOYMENT AND SEVERANCE AGREEMENT
This will confirm American Stores Company's (the "Company's")
offer of continuing employment and severance for you. The terms
of our offer are set forth as follows:
1. You shall remain in active employment status for payroll and
benefits purposes for the period running from your execution of
this Agreement through June 30, 1997. We will expect you to
perform such services as are reasonably requested by the Company
through June 30th of this year. However, we understand that you
will need to begin your efforts to secure a new position during
the next several months, including arranging and attending
interviews, and therefore we will not expect you to be available
to perform services for the Company on a full-time basis during
this period. You will continue to receive your current
compensation through June 30, 1994, even if you secure and
commence new employment prior to such date. Effective July 1,
1994, or the date you commence new employment, whichever is
earlier, you shall resign all titles you hold with any of our
companies.
After June 30, 1994, you will not be expected to report to
the Company facilities on any type of regular basis. Instead,
you agree to perform such services as may be reasonably requested
by the Company. You shall perform such services at times
mutually satisfactory to you and the Company, and your obligation
to perform such services will not interfere with any other
employment you might find. Any travel or other incidental
expenses resulting from such services will be reimbursed as
provided by Company policies.
Following your resignation of titles, you are free to
commence other employment and to compete with the Company
provided, however, you agree that you will not recruit, solicit,
or encourage any present employee of American Stores Company, its
subsidiaries, affiliates, or operating companies to terminate
employment with such entity for a period of one year beginning
July 1, 1994.
Your compensation during the period July 1, 1994 through
June 30, 1997 will be $7,200.00 per month, less applicable
deductions.
2. As part of this Agreement and during the term of it, you
hereby acknowledge the proprietary nature of the non-public
financial information, business records, real estate and business
plans and programs, trade secrets, documents, contracts of every
description, manuals and statements of policy with which you have
or will become familiar with during your employment and the
legitimate interest of the Company and its affiliates in
protecting same from disclosure to others without the written
consent of the Company. In this regard, you agree not to use or
disclose such matters to any individual or organization, either
as an employee or consultant, unless and to the extent that such
information or materials become generally known to and available
for use by the public, and to recognize the right of the Company
to enjoin such disclosure and hold you responsible through an
injunctive action and/or for any damages which might result
therefrom.
3. This is a personal service agreement which may not be
assigned. In the event of your death, payments shall be made
through the date of such occurrence. In no event will any
payment be made after date of death to your estate or any named
beneficiary, except for amounts owed to you prior to the date of
death.
4. Your employment will terminate on June 30, 1997.
5. It is agreed that the payments contained herein are
inclusive of all vacation pay including accrued, earned or unused
vacation.
6. The Key Executive Stock Purchase Incentive Plan will
continue based on Plan provisions. It is the Company's express
intent that your continued active employment status through June
30, 1997, will mean that, except in the event of your death prior
to such date, you will remain in "service" (as defined in the
Plan) through the full "Performance Cycle" (as defined in the
Plan) and therefore fully eligible for a full "Deferred Award"
pursuant to Section 8 of the Plan. Your resignation of titles
shall not constitute a "Termination of Service" for purposes of
the Plan. The termination of your employment on June 30, 1997,
will not cause an acceleration of the repayment of your Purchase
Loan; the balance of such loan, after the application of your
Deferred Award, shall remain payable in three annual installments
commencing on June 30, 1998, in accordance with Section 7 of the
Plan.
7. In consideration of the covenants and payments to be made by
the Company, you release American Stores Company, its
subsidiaries, affiliates, and their respective successors,
officers, directors and employees (hereinafter collectively
referred to as "the Company") from any and all claims, actions
and causes of action arising out of your employment with the
Company, including but not limited to claims based on express or
implied contract, covenants of fair dealing and good faith,
wrongful discharge, the Age Discrimination in Employment Act of
1967 as amended by the Older Workers Benefits Protection Act of
1990, Title VII of the Civil Rights Act of 1964, the Workers
Adjustment and Retraining Notification Act and any other
applicable federal, state, or local laws, ordinances and
regulations. This release does not, however, apply to or waive
any rights you may have under applicable workers' compensation
laws, the Company's employee benefit plans, the Key Executive
Stock Purchase Incentive Plan, or this Continuing Employment and
Severance Agreement.
Further, by agreeing to this release, you are forever
relinquishing any right to sue any of the companies and persons
described above based on any claim arising out of your employment
with the Company (other than claims arising under employee
benefit plans or claims for injuries compensable under workers'
compensation laws, claims arising under the Key Executive Stock
Purchase Incentive Plan, or claims arising under this Continuing
Employment and Severance Agreement) and you agree that you will
never file any charge or complaint or maintain any litigation
against any of those companies or persons based on any of the
employment- related claims you are giving up by signing this
document. Breach of this covenant will result in, among other
damages, the forfeiture of all sums received by you as a result
of this agreement.
Further, you acknowledge that you have been advised to
consult with an attorney of your choice regarding the terms of
this document before signing it and that you have had 21 days in
which to consider the terms of this document before signing it.
You may revoke this agreement any time within seven days of
signing it and you acknowledge that the terms of this agreement
will not be effective until the seven-day revocation period
expires.
8. If you execute and return the attached Severance Agreement
and Release on or after June 30, 1997, the Company, after the
expiration of the seven-day period described in paragraph 4 of
the attached, will pay you $10,411 in severance, less applicable
deductions. You will receive any balance due from your Annual
Bonus for 1993 in April 1994, which will be based on actual
Company results. No additional Annual Bonus plan payments will
become due or payable.
You will receive a payout in April 1994 of any balance due
from the 91-92-93 Long Term Incentive Plan based on actual
results. No additional Long Term Incentive Plan payments will
become due or payable.
9. You are eligible for a Company contribution to your ASRE
account for compensation paid through 1996. The normal ASRE
vesting schedule applies. In July 1997, you will receive a
payment equal to the value of any forfeitures, grossed up for
taxes, that occur under the ASRE/SERP plans. You will also
receive in July 1997 a payment equal to the value of the Company
contribution on pay and deposits that would have been made had
such pay been ASRE eligible, grossed up for taxes, for the
monthly pay in 1997 that is not ASRE eligible, using the same
contribution factors as will be used for the 1996 Plan. Amounts
referred to in this paragraph for ASRE/SERP gross up do not
pertain to severance pay, which is not ASRE eligible. Payments
to be made in this paragraph are payments made outside of
ASRE/SERP and are not ASRE/SERP eligible.
10. During the period July 1, 1994 through June 30, 1997, you
will continue to participate, at your election, in all employee
benefit plans and programs available to active, exempt employees
such as AD&D, health care, life and supplemental life insurance,
but excluding Short and Long-Term Disability coverage, at the
same cost and on the same terms available to such employees.
Benefits based on salary will be based on an annual salary of
$180,000.00.
11. Medical, dental, life insurance and other benefits as noted
in paragraph 10 above will end at midnight June 30, 1997. At
that time, you will have the opportunity afforded to all
terminating employees to convert, to the extent permitted, any
group coverage to an individual policy or program, or to select
COBRA coverage.
12. The Company will provide a one-time moving package involving
Relocation of Employee and Equity Home Purchase in accordance
with Standard Practice Bulletins 2.4 and 2.5, provided the move
is completed prior to June 30, 1997.
13. The Company agrees to continue your coverage under the
Director's and Officer's Liability policy for any act or omission
or claim which arises while you are an officer of the Company,
irrespective of when such claim or action is filed.
14. No other benefits of any kind will be provided to you,
except as specifically provided herein.
15. A copy of American Stores Company Termination Allowance Plan
and American Stores Company Termination Allowance Summary Plan
Description are enclosed. All provisions of the Plan will be in
effect except for the calculation of the termination allowance
amount as described in paragraph 8 hereof and the extension of
the benefits period and payment of three months of COBRA premium
as described in paragraph 4.5 (e) of the American Stores Company
Termination Allowance Plan.
16. This Agreement supersedes and cancels all other prior
agreements between you and the Company, its affiliates, parents
and subsidiaries, other than the Key Executive Stock Purchase
Incentive Plan, and any employee benefit plans you continue to
participate in pursuant to this Agreement.
17. You understand that this agreement is contingent on approval
by the Compensation and Stock Option Committee of the Board.
Please take the time to carefully review the above and the
attached Release. If the foregoing is acceptable to you, please
sign both copies of this memorandum and return them to me for my
signature. A fully executed original copy will be returned to
you.
This offer will expire on April 1, 1994, unless you have executed
this document and returned both copies to me prior to that time.
AMERICAN STORES COMPANY
By /s/Victor L. Lund
___________________________
Accepted and Agreed to:
/s/Alexander L. Searl
___________________________
Date: March 25, 1994
______________
Exhibit 10.N
AMERICAN STORES COMPANY
KEY MANAGEMENT
ANNUAL INCENTIVE PLAN FOR FISCAL 1994
<PAGE>
AMERICAN STORES COMPANY
KEY MANAGEMENT ANNUAL INCENTIVE PLAN
____________________________________
I am pleased to inform you that you have been selected to participate in the
American Stores Company Key Management Annual Incentive Plan for the fiscal
year 1994. The basic objective of this incentive plan is to achieve an
improvement in earnings. Earnings is a key element for measuring the success
of the Company and provides a fair method to measure the performance of all
who share in the Plan.
OVERVIEW
________
The Plan has been designed to provide an incentive to focus on achieving and
exceeding the annual earnings target. The Plan has adopted a weighting of
100% on earnings. The maximum payout as a percent of base wage will be equal
to your bonus level times 250%. As you know, management has decided that
ongoing staff reductions are essential to the viability of the business.
Accordingly, the amount of bonus earned under this Plan will be reduced by
16.66% if the Company-wide administrative headcount reduction goal of 600
full-time equivalents and $20,000,000 in salary and target bonus is not
achieved by the fourth quarter of FY '94.
Each participant will have an expected incentive award equal to a specified
percentage of his or her average annual salary during the fiscal year. For
this purpose, average annual salary is defined as the base pay an individual
received during the fiscal year of January 30, 1994 through January 28, 1995.
Each participant will be informed of his or her percentage participation which
is determined by each individual's job classification and responsibilities.
(The payout relationships indicated in this document are for a bonus
participant whose bonus level is at 30% of base wage; participants at
different bonus levels are prorated from this level. Exhibit I will assist
you in estimating your bonus payout amount.)
IMPROVEMENT IN EARNINGS
_______________________
Participants in the Plan will be awarded, subject to achieving the
administrative headcount and wage reduction goals as noted above, an incentive
payment based on the increase in adjusted earnings in the current fiscal year
over the base earnings. Adjusted earnings equal consolidated earnings before
tax, adjusted for gains or losses and any one-time non-recurring events. The
LIFO amount to be used for bonus purposes will not vary from the budgeted
amount. The base earnings objective for fiscal 1994 is $___________. The
base earnings at which point the bonus will begin to be earned is $___________
or 77% of $___________.
The following describes the relationships of earnings to bonus payouts:
% of Target % of Base
Earnings Wage Earned
________ ___________
77% - 99.99% 1.304348% for each 1%
100% - 123% 1.956521% for each 1%
AMERICAN STORES COMPANY
KEY MANAGEMENT ANNUAL INCENTIVE PLAN (cont.)
SUMMARY & ADMINISTRATION
________________________
Key Management employees transferred to other operating companies or
transferred to other incentive plans will share in the American Stores Company
Plan in the proportion to the time worked in any full months under the Plan
during the fiscal year. For this purpose, full month is defined as any month
in which the participant works more than 50% of the business days (including
paid holidays). For example, if an individual worked under the Plan for 9
months and then was transferred or promoted to another position carrying with
it participation in another incentive plan, that individual would receive
three-fourths of the incentive compensation to which she/he would have been
entitled if she/he remained under the Plan for the full fiscal year.
For those bonus payments made after the calendar year in which the employee
retires at or after 57, or in the case of death, an additional payment will be
made at the same time the bonus payment is made. The calculation for this
payment will be:
Bonus payment X the latest available company contribution on pay factor
Plus
Bonus payment X 6% X the latest available company match on personal deposits
factor
Being a member of the Key Management Annual Incentive Plan should not be
construed as a contract for employment, nor an agreement on the part of
management of the Company for such employment. Termination of employment of a
participant for any reason except retirement, death or disability prior to the
end of the fiscal year shall, except at the approval of the President and CEO
of American Stores Company, be cause for cancellation of all rights to a bonus
award for that year. Those employees who retire at age 57 or older or leave
employment due to death or permanent disability will be paid a bonus amount
proportionate to the number of full months completed in the fiscal year.
Employees who are on sick leave in excess of one month will forfeit their
share of bonus accrued during their illness unless otherwise approved by the
President and CEO of American Stores Company.
Incentive compensation shall be computed on the results of the operation of
the full fiscal year January 30, 1994 through January 29, 1995 as adjusted.
The determination of adjusted earnings will be made by the Compensation and
Stock Option Committee of American Stores Company and will be conclusive with
respect to all incentive awards to be paid. With this in mind, it is the
intention of the Company that all incentive payments for fiscal year 1994 will
be paid in April 1995.
EXHIBIT I
_________
Steps to estimate your bonus payout:
1. Locate on the attached table the value that is next to the expected
earnings achievement for fiscal year 1994.
Example: If you expect that earnings will be 103% of target, the value
is
119.57% which is the percentage of bonus you will earn.
2. Use the value determined above in the formula below.
Fiscal wage X Bonus Level X Value = Estimated
Participation from Bonus
(as indicated on #1 Payment
your cover letter)
Example: Fiscal wage Feb. 94-Jan. 95 = $50,000
Bonus Level = 30%
Earnings as % of Target = 103%
50,000 X 30% X 119.57% = *$17,935.50
==========
*If the headcount and wage reductions are not met, this $17,935.50 bonus will
be reduced by 16.66% to: $14,946.25.
==========
ANNUAL INCENTIVE PLAN PAYOUT TABLE FOR FY 94
PERCENT OF PERCENT OF
EARNINGS EARNINGS
TARGET PERCENT OF TARGET PERCENT OF
ACHIEVEMENT BONUS EARNED ACHIEVEMENT BONUS EARNED
___________ ____________ ___________ ____________
77.00% 0.00% 101.00% 106.52%
78.00% 4.35% 102.00% 113.04%
79.00% 8.70% 103.00% 119.57%
80.00% 13.04% 104.00% 126.09%
81.00% 17.39% 105.00% 132.61%
82.00% 21.74% 106.00% 139.13%
83.00% 26.09% 107.00% 145.65%
84.00% 30.43% 108.00% 152.17%
85.00% 34.78% 109.00% 158.70%
86.00% 39.13% 110.00% 165.22%
87.00% 43.48% 111.00% 171.74%
88.00% 47.83% 112.00% 178.26%
89.00% 52.17% 113.00% 184.78%
90.00% 56.52% 114.00% 191.30%
91.00% 60.87% 115.00% 197.83%
92.00% 65.22% 116.00% 204.35%
93.00% 69.57% 117.00% 210.87%
94.00% 73.91% 118.00% 217.39%
95.00% 78.26% 119.00% 223.91%
96.00% 82.61% 120.00% 230.43%
97.00% 86.96% 121.00% 236.96%
98.00% 91.30% 122.00% 243.48%
99.00% 95.65% 123.00% 250.00%
100.00% 100.00%
ACTUAL CALCULATIONS WILL USE 4 DECIMAL PLACES
Exhibit 10.O
AMERICAN STORES COMPANY
KEY MANAGEMENT
LONG-TERM PERFORMANCE INCENTIVE PLAN
1994 - 1995 - 1996
__________________
<PAGE>
AMERICAN STORES COMPANY
KEY MANAGEMENT
LONG-TERM PERFORMANCE INCENTIVE PLAN
1994 - 1995 - 1996
PLAN PURPOSE
____________
The purposes of the American Stores Company Long-Term Performance Incentive
Plan are to:
o focus executive's attention prospectively on long-term results
and balance the effect of the short-term incentive plan;
o direct attention to overall corporate performance and reward
achievement of the Company's long-term financial goals; and
o maintain the competitiveness of the American Stores'
compensation program, and assist in retaining executives.
ELIGIBILITY
___________
Participation in the American Stores Company Long-Term Performance Incentive
Plan is limited to key executives who have a significant impact on the long-
term results of the Company. Participation will be on a selected basis,
reflecting position responsibilities and impact on long-term results.
PERFORMANCE CYCLES
__________________
Performance cycles will be three years in length, with a new cycle starting
every year. Cash payments, if warranted by Corporate performance, will be
made at the end of the three-year cycle. Thus, assuming performance goals
continue to be met, payments will be made annually once the first cycle has
been completed, based on results over the previous three years.
TARGETED AWARDS
_______________
Long-term performance award opportunities are designed to balance the effect
of the Company's short-term incentive awards, to provide meaningful long-term
incentive compensation and to result in competitive total direct compensation
levels. The degree of attainment of the Corporation's long-term performance
goals determines the actual size of the participant's awards. Target awards
are 20% of the participants' average annual base salary over the three-year
performance cycle. The maximum award attainable is 70% of the participant's
average annual base salary over the three-year performance cycle.
PERFORMANCE MEASUREMENT
_______________________
The 94-95-96 Plan will be based on total earnings performance based on
Earnings Per Share (E.P.S.).
At or before the beginning of each performance cycle, the specific performance
criteria will be set by the Compensation and Stock Option Committee.
DETERMINATION OF INDIVIDUAL AWARDS
__________________________________
The award schedule is shown in Exhibit I. Exhibit II provides an example of
the performance award calculation.
The E.P.S. award is based upon how the Company's total E.P.S. over the three-
year cycle compares to a preset goal, as set by the Board of Directors. As an
example, if American Stores' total three year E.P.S. is 100% of target, the
E.P.S. award would be 20% of the participant's average annual base salary over
the three-year performance cycle.
ADMINISTRATION OF PLAN
______________________
The following are administrative guidelines for the American Stores Company
Long-Term Performance Incentive Plan:
o The Compensation and Stock Option Committee of The Board of
Directors has final approval of the Plan. Determination of
attainment of the performance measure will be made by the
Compensation and Stock Option Committee.
o Awards will be made in April following each performance cycle,
after the final financial results of American Stores Company
have been approved.
o All awards will be made in cash.
o In the case of death, disability as determined under the
American Stores Long-Term Disability Plan, or retirement at or
after age 57, a pro rata award will be made based upon the
number of months of service completed during the award cycle (s)
and the participant's average annual base salary. Payment will
be made at the regular time at the end of the performance
cycle(s) (i.e., after the final financial results of American
Stores Company have been approved).
o Individuals who are selected to participate in the Plan during a
cycle will receive an award prorated based on the length of time
they were participants in the Plan.
o In the event your position responsibilities change (other than
termination) to the extent that it is determined that you are no
longer eligible to participate in the Plan, you will be paid at
the end of the cycle an award prorated on the basis of time you
were a participant.
o Unless otherwise approved in writing by the Chairman of the
Board, any participant who resigns or is terminated during a
performance cycle forfeits all rights to any awards.
o The Compensation and Stock Option Committee has authority to
interpret the Plan and make all determinations required to
administer the Plans.
o For those bonus payments made after the calendar year in which
the employee retires at or after age 57, or in the case of
death, an additional payment will be made at the same time the
bonus payment is made. The calculation for this payment will
be:
Bonus payment X the latest available company contribution on
pay factor.
Plus
Bonus payment X 6% X the latest available company match on
personal deposits factor.
<PAGE>
EXHIBIT I
AMERICAN STORES COMPANY
94-95-96 LONG-TERM INCENTIVE PLAN
_________________________________
E.P.S. AWARD SCHEDULE
_____________________
Total Three Year Performance Award As A
E.P.S. As Percent Percent of Average Annual
of Target Base Salary For the Cycle * Ratio
__________________ ___________________________ _____
120% + 70%
3:1
110% 40%
2:1
100% 20%
1:1
90% 10%
1:1
80% 0
* Performance award is paid at the end of each performance cycle (one cycle
ending every three years), and is calculated using average annual base
salary over the three-year performance cycle times the percentage
performance award earned.
EARNINGS PER SHARE FOR 1994 - 1995 - 1996 PLAN
THREE YEAR TARGETED E.P.S. IS $_____
The three year target E. P. S. of $_____ is based on the current number of
outstanding common shares which is approximately 71,000,000. In the event
that the amount of common shares outstanding is increased through stock
dividends or stock splits or conversion of convertible debt the target
earnings per share will be adjusted.
EXHIBIT II
AMERICAN STORES COMPANY
PERFORMANCE AWARD CALCULATIONS
______________________________
1994-1995-1996
______________
To calculate your bonus determine the actual E.P.S. as a percentage of target
and convert this into the "performance award" as a percent of average annual
base salary.
For example, if total 3 year E.P.S. as a percent of target is 105%, the
performance award is 30% of your average annual base salary:
20% at target plus 2% for each 1% above 100% of target - 5 x 2% = 10% -
for a total of 30%
"Average annual base salary" is calculated by totaling wages while a
participant and dividing by 3
Example #1: Year Wage Participant for full cycle
____ ____
94 95,000
95 100,000 "average annual base
96 105,000 salary" is 100,000
Average annual base salary x performance award as a percent of average annual
base wage = LTIP Bonus Award
100,000 X 30% = LTIP Bonus of $30,000
_____________________________________________________________________________
Example #2: Year Wage Participant for last 30
____ ____ months of cycle
94 47,500 "average annual base
95 100,000 salary" is 84,167
96 105,000
Average annual base salary x performance award as a percent of average annual
base wage = LTIP Bonus Award
84,167 X 30% = LTIP Bonus of $21,883
<TABLE>
Exhibit 11
AMERICAN STORES COMPANY
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
1993(1) 1992(1)(2) 1991(1)(2)
________ ________ ________
<S> <C> <C> <C>
Earnings Per Share - Before Dilution
____________________________________
Earnings applicable to shareholders before extra-
ordinary item and cumulative effect of a change
in accounting principle - before dilution $262,090 $207,466 $240,016
Extraordinary item (15,000) 0 0
Cumulative effect of a change in accounting principle 0 0 (40,734)
________ ________ ________
Earnings applicable to shareholders - before dilution $247,090 $207,466 $199,282
======== ======== ========
Earnings per share before extraordinary item cumulative
effect of a change in accounting principle - before
dilution $1.85 $1.48 $1.73
Extraordinary item (0.11) 0 0
Cumulative effect of a change in accounting principle 0 0 (0.29)
________ ________ ________
Earnings per share - before dilution $1.74 $1.48 $1.44
======== ======== ========
Average shares outstanding - before dilution 142,202 140,314 138,364
======== ======== ========
Earnings Per Share - After Dilution
___________________________________
Earnings applicable to shareholders before extra-
ordinary item and cumulative effect of a change
in accounting principle - before dilution $262,090 $207,466 $240,016
Plus interest on convertible debentures 7,612 7,612 2,899
________ ________ ________
Earnings applicable to shareholders before extra-
ordinary item and cumulative effect of a change
in accounting principle - after dilution 269,702 215,078 242,915
Extraordinary item (15,000) 0 0
Cumulative effect of a change in accounting principle 0 0 (40,734)
________ ________ ________
Earnings applicable to shareholders - after dilution $254,702 $215,078 $202,181
======== ======== ========
Earnings per share before extraordinary item and
cumulative effect of a change in accounting principle
- after dilution $1.79 $1.44 $1.70
Extraordinary item (0.10) 0 0
Cumulative effect of a change in accounting principle 0 0 (0.29)
________ ________ ________
Earnings per share - after dilution $1.69(3) $1.44(3) $1.41(3)
======== ======== ========
Average shares outstanding - after dilution 151,020 149,694 142,976
======== ======== ========
(detail on page following)
</TABLE>
<TABLE>
Exhibit 11
AMERICAN STORES COMPANY
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
(Continued)
Calculation of Average Shares
Outstanding - After Dilution 1993(1) 1992(1)(2) 1991(1)(2)
____________________________________________________ ________ ________ ________
<S> <C> <C> <C>
Effect of assumed exercise of stock options:
____________________________________________
Proceeds from assumed exercise $23,557 $33,451 $31,216
Shares under options outstanding 2,139 3,176 3,304
Shares assumed acquired with proceeds under the
treasury stock method (1,099) (1,574) (1,654)
_______ _______ _______
Incremental shares due to assumed exercise
of stock options 1,040 1,602 1,650
======= ======= =======
Average shares outstanding - after dilution:
____________________________________________
Average shares outstanding - before dilution 142,202 140,314 138,364
Assumed exercise of stock options 1,040 1,602 1,650
Assumed conversion of debentures 7,778 7,778 2,962
_______ _______ _______
Total 151,020 149,694 142,976
======= ======= =======
(1) Restated as necessary to reflect the March 1994 two-for-one stock split.
(2) Restated to reflect adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," as if effective at the beginning of 1989.
(3) Dilution is less than 3%.
</TABLE>
<TABLE> Exhibit 12
AMERICAN STORES COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
In the computation of the ratio of earnings to fixed charges for the Company, earnings
consist of pre-tax income from continuing operations before the impact of an extraordinary
item and the cumulative effect of a change in accounting principle, less gain/(loss) on
sale of assets, other, plus fixed charges (adjusted for capitalized interest). Fixed
charges consist of interest, whether expensed or capitalized (including the amortization
of debt expense), plus the amount of rental expense which is representative of the
interest factor in the particular case.
(In thousands) 1993 1992 (1) 1991(1)
________ _________ ________
<S> <C> <C> <C>
Earnings before income taxes, extra-
ordinary item and cumulative effect
of a change in accounting principle $480,805 $378,281 $438,468
Gains (losses) on sale of assets,
other 24,128 (35,116) 98,717
________ ________ ________
Pretax income from continuing
operations 456,677 413,397 339,751
Fixed charges (detail below) 284,834 311,937 371,056
Adjusted for:
Capitalized interest (3,416) (1,966) (4,003)
Previously capitalized interest
amortized during the period 1,246 1,288 1,488
________ ________ ________
Earnings $739,341 $724,656 $708,292
======== ======== ========
Interest expense (2) $189,773 $214,394 $265,098
Capitalized interest 3,416 1,966 4,003
Interest factor for rental expense
of operating leases 91,645 95,577 101,955
________ ________ ________
Fixed charges $284,834 $311,937 $371,056
======== ======== ========
Ratio of earnings to fixed charges 2.60 to 1 2.32 to 1 1.91 to 1
(1) Restated to reflect adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if effective at the
beginning of fiscal 1989.
(2) As reported in financial statements. Includes amortization of debt
expense and interest on capital leases and is net of capitalized
interest.
</TABLE>
Exhibit 13
<TABLE>
Common Stock Market Prices and Dividends(1)
1993 1992 1991
__________________________ __________________________ ___________________________
Market Price Market Price Market Price
____________ Cash ___________ Cash ___________ Cash
Dividend Dividend Dividend
High Low Declared High Low Declared High Low Declared
__________________________ __________________________ ___________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $22 3/16 $18 1/8 $.10 $18 5/16 $16 $.088 $22 25/32 $15 1/4 $.07
Second Quarter 23 3/16 20 3/16 .10 18 5/8 15 1/4 .088 21 7/8 19 7/16 .07
Third Quarter 24 5/8 19 7/8 .10 21 1/4 17 9/16 .088 21 1/8 17 1/4 .088
Fourth Quarter 22 1/4 19 7/8 .10 23 1/2 20 1/8 .10 19 13 .088
____ _____ _____
$.40 $.36 $.32
==== ===== =====
The market price range on the New York Stock Exchange and the dividends declared on the Company's stock
are set forth in the table above. The common shares of the Company are listed on the New York,
Philadelphia, Chicago and Pacific stock exchanges under the trading symbol "ASC". The number of
shareholders of record of the Company's common stock at March 25, 1994, was 19,262.
(1) Restated as necessary to reflect the March 1994 and July 1991 two-for-one stock splits.
</TABLE>
<PAGE>
Selected Financial Data
_______________________
The following consolidated selected financial data of the Company for the last
five years should be read in conjunction with the consolidated financial
statements and related notes appearing on pages 33 to 49.
Comparisons of the results of operations between fiscal years 1989 to 1993 are
rendered more difficult due to the Company's disposition of stores including the
disposition of 74 Jewel Osco combination food and drug stores in the first
quarter of 1992, 145 Alpha Beta Company stores and 59 Osco Drug stores in the
second and third quarters of 1991 and the 44-store Buttrey Food and Drug
division in the third quarter of 1990. These disposed stores generated sales
in the amounts of $0.3 billion, $2.2 billion, $4.0 billion and $4.4 billion in
1992, 1991, 1990 and 1989, respectively.
<TABLE>
(In thousands, except per share data)(1) 1993 1992(2) 1991(2) 1990(2) 1989(2)(3)
________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $18,763,439 $19,051,180 $20,822,956 $22,155,530 $22,004,154
=========== =========== =========== =========== ===========
Earnings before extraordinary item
and cumulative effect of changes
in accounting principles $262,090 $207,466 $240,016 $190,068 $118,137
Extraordinary item - early retire-
ment of debt - net of taxes (15,000)
Cumulative effect of changes in
accounting principles --
Postretirement health care benefits (40,734)
Income taxes (181,842)
___________ ___________ ___________ ___________ ___________
Net earnings (loss) 247,090 207,466 199,282 190,068 (63,705)
Less preferred dividends declared--
Series A $4.375 (4) (8,601)
___________ ___________ ___________ ___________ ___________
Net earnings (loss) available to
common shareholders $247,090 $207,466 $199,282 $190,068 $(72,306)
=========== =========== =========== =========== ===========
Average common shares outstanding 142,202 140,314 138,364 138,044 126,852
Earnings per common share before
extraordinary item and cumulative
effect of changes in accounting
principles $1.85 $1.48 $1.73 $1.38 $.86
Extraordinary item (.11)
Cumulative effect of changes in
accounting principles--
Postretirement health care benefits (.29)
Income taxes (1.43)
___________ ___________ ___________ ___________ ___________
Net earnings (loss) per common share $1.74 $1.48 $1.44 $1.38 $(.57)
=========== =========== =========== =========== ===========
Cash dividends declared per common
share $.40 $.36 $.32 $.28 $.25
Total assets at year-end $6,927,434 $6,763,793 $7,198,050 $7,511,771 $7,739,065
Total debt and obligations under
capital leases at year-end $2,167,999 $2,248,316 $2,798,578 $3,193,707 $3,588,631
Total capital expenditures (5) $652,928 $476,617 $378,593 $374,007 $644,236
Store count (6) 1,695 1,672 1,631 1,848 1,894
Selling area square footage (7) 32,727 32,320 34,428 38,055 38,609
(1) Restated as necessary to reflect the March 1994 and July 1991 two-for-one stock splits.
(2) Restated to reflect Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," as if effective at the beginning of fiscal 1989.
(3) 53-week fiscal year.
(4) The Company called for redemption all of its Series A $4.375 Preferred Stock in October 1989.
(5) Includes present value of new leases.
(6) Includes both the food and drug sides of Jewel Osco combination stores which are counted as separate
stores.
(7) Selling area square footage was 74% of total retail square footage in 1993.
NOTE: The fiscal year of the Company ends on the Saturday nearest to January 31. All references herein
to "1993", "1992", "1991", "1990" and "1989" mean the fiscal years ended January 29, 1994, January 30,
1993, February 1, 1992, February 2, 1991 and February 3, 1990, respectively.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
_____________________________________________________________________________
Results of Operations
_____________________
Total store counts were 1,695, 1,672 and 1,631 at the end of 1993, 1992 and
1991, respectively, which includes counting the food side and the drug side of
Jewel Osco combination stores as separate stores. There were 148, 145 and 143
Jewel Osco combination stores at year-end 1993, 1992 and 1991, respectively.
During 1993, the Company acquired 55 Reliable drug stores and 4 Thrifty drug
stores. During 1992, the Company acquired 63 CVS drug stores and the rights to
operate 22 CVS health and beauty aid stores and acquired 30 Thrifty and Rx Plus
drug stores in Arizona and Nevada. In addition, the Company opened 39, 36 and
27 new stores in 1993, 1992 and 1991, respectively. The Company currently
expects to open 40 new stores in 1994.
Comparisons of the results of operations between fiscal years 1993, 1992 and
1991 are rendered more difficult due to the Company's disposition of stores,
including the disposition of 74 Jewel Osco combination food and drug stores in
the first quarter of 1992 and 145 Alpha Beta Company stores and 59 Osco Drug
stores in the second and third quarters of 1991. These disposed stores
previously generated sales of $0.3 billion in 1992 and $2.2 billion in 1991.
These stores are referred to as "Disposed of Stores" in the financial tables
which follow. In addition, the Company closed 75, 36 and 40 stores in 1993,
1992 and 1991, respectively. The Company anticipates that it will close
additional stores in 1994 in the ordinary course of business as new stores
replace older stores and as the performance of all existing locations is
continually reviewed.
Total sales were $18.8 billion in 1993, $19.1 billion in 1992 and $20.8 billion
in 1991. The decrease in total sales from 1991 to 1993 is primarily
attributable to the disposition of stores in 1992 and 1991. Sales from
comparable operations decreased 0.2% in 1993, and increased 0.8% and 2.6% in
1992 and 1991, respectively. Sales at like stores (which are stores that have
been open at least one year) decreased 1.0% in 1993, decreased 0.5% in 1992 and
increased 0.1% in 1991. The retail food and drug industry is expected to remain
highly competitive with a continuing absence of significant inflation in the
near future.
The tables below present total sales, as well as like-store sales percentage
change, by major operating region and in total:
Total Sales
______________________________
(In billions of dollars) 1993 1992 1991
________________________________________________________________
Eastern Food Operations $ 7.2 $ 7.4 $ 7.5
Western Food Operations 7.2 7.1 7.2
Drug Store Operations 4.3 4.0 3.7
Other 0.1 0.3 0.2
_____ _____ _____
Comparable 18.8 18.8 18.6
Disposed of stores 0.3 2.2
_____ _____ _____
Total sales $18.8 $19.1 $20.8
===== ===== =====
Like-Store Sales
______________________________
(Percent change) 1993 1992 1991
________________________________________________________________
Eastern Food Operations (1.8)% (0.7)% (0.5)%
Western Food Operations (1.9) (2.3) (2.9)
Drug Store Operations 2.0 2.9 7.7
_____ _____ ____
Total (1.0)% (0.5)% 0.1 %
===== ===== ====
Gross profit increased as a percent of sales to 26.4% in 1993, compared to 26.1%
in 1992 and 25.0% in 1991. In 1993, the gross profit percentage increased
slightly in the eastern and western food operations, partially due to
improvements in the mix of products sold, and decreased in the drug store
operations, primarily due to lower gross profit percentages within the
prescription drug category. The increase in the gross profit percentage in 1992
over 1991 is partially attributable to reductions in the LIFO charge to
earnings, as well as slightly higher gross margins at our eastern and western
food operations which were driven by increases in the general market to cover
increased costs. The annual pre-tax LIFO charge to earnings amounted to $7.2
million in 1993, $16.5 million in 1992 and $34.9 million in 1991. Lower
inflation, particularly in the drug stores, sales of assets and other reductions
in inventory levels influenced the LIFO calculation over the past two years.
Operating expense, as a percent of sales, increased slightly to 23.0% in 1993,
compared to 22.8% in 1992 and 22.1% in 1991. Operating expense in 1993 included
$7.6 million of expenses associated with the legal settlement related to meat
products in California and severance programs stemming from the Company's
expense reduction programs ($3.4 million eastern food, $3.5 million western
food, $0.7 million drug stores). Additionally, operating expense in 1992
included $17.1 million in costs related to consolidation of administrative
functions at our eastern food operations. Operating expense in 1991 included
$19.6 million as a result of increases to the Company's reserve for claims and
attorneys' fees relating to the 1985 Salmonella incident.
Operating profit was $641.9 million or 3.4% of sales in 1993, $623.3 million or
3.3% of sales in 1992 and $602.0 million or 2.9% of sales in 1991. Operating
profit for fiscal 1992 and 1991 was negatively impacted by operating losses of
disposed stores. Operating profit from comparable operations increased 0.6% in
1993, increased 5.1% in 1992 and decreased 3.0% in 1991. The increase in
comparable operating profit, to $641.9 million in 1993 from $637.8 million in
1992 as shown in the following table, is partially attributable to a lower LIFO
charge to earnings in 1993 and the decrease in consolidation expenses at the
Company's eastern food operations. These decreases in expenses were offset by
the legal settlement and severance expenses described above, lower earnings in
the Company's western food operations in the first half of 1993 due to the
implementation of a price reduction program, as well as lower operating profit
in the drug store operations in the third quarter of 1993 due to lower gross
profit from third-party payor plans and the integration costs of several minor
acquisitions. While the amount cannot be reasonably quantified, the Company
believes the western food operations' price reduction program will not have a
similar negative impact on operating results in the first half of 1994. In
addition, while the amount cannot be reasonably quantified, third-party payor
plans will continue to put pressure on gross margins in the drug store
operations but are not expected to have a negative impact on operating results
in future quarters. While each of the three operating regions had lower
operating profit in 1993 than 1992, each region reported positive results in the
fourth quarter of 1993 compared to the fourth quarter of 1992.
The table below presents operating profit by major operating region and in
total:
Operating Profit
_______________________________
(In millions of dollars) 1993 1992 1991
_________________________________________________________________
Eastern Food Operations $267.9 $269.1 $273.7
Western Food Operations 248.6 256.7 260.9
Drug Store Operations 197.0 205.0 179.7
LIFO charge (7.2) (16.5) (34.9)
Purchase accounting amortization (79.2) (79.5) (79.9)
Other 14.8 3.0 6.8
______ ______ ______
Comparable 641.9 637.8 606.3
Disposed of stores (14.5) (4.3)
______ ______ ______
Total operating profit $641.9 $623.3 $602.0
====== ====== ======
Net other expense, consisting primarily of interest expense and net gains or
losses on the sale of assets and other miscellaneous transactions, was $161.1
million in 1993, $245.0 million in 1992 and $163.5 million in 1991. Interest
expense was $189.8 million, $214.4 million and $265.1 million in 1993, 1992 and
1991, respectively. Interest expense decreased in 1993 and 1992 due to
generally lower debt levels and interest rates. Other income and expense was
also affected by gains or losses on the sale of assets and other miscellaneous
transactions. The 1993 net gain of $24.1 million includes $45.7 million of
income from the resolution of the "Rule of 80" litigation, which concerned the
Company's termination of the early retirement feature of an employee retirement
plan, offset by approximately $17.2 million of various charges, including costs
associated with store closings, costs of integrating acquired stores into
existing operations and a $3.6 million charge relating to costs associated with
the earthquake in southern California. Net losses from the sale of assets and
other miscellaneous transactions were $35.1 million in 1992, primarily from the
sale of 74 Jewel Osco combination food and drug stores. Net gains from the sale
of assets and other miscellaneous transactions amounted to $98.7 million in
1991, primarily from the sale of Alpha Beta Company.
Earnings before income taxes, an extraordinary item and the cumulative effect
of a change in accounting principle, were $480.8 million in 1993, $378.3 million
in 1992 and $438.5 million in 1991. The effective income tax rates were 45.5%
in 1993, 45.2% in 1992 and 45.3% in 1991. The recently enacted Omnibus Budget
Reconciliation Act of 1993 increased the Company's annual effective federal tax
rate by one percent retroactive to January 1, 1993. The change in tax rates
increased deferred taxes under SFAS No. 109, "Accounting for Income Taxes," and
resulted in a one-time charge of approximately $4 million, or $.03 per share.
Net earnings in 1993 were impacted by $.07 per share, including the retroactive
portion of the rate change. The newly enacted federal tax rates are not
anticipated to have a material impact on the Company's ongoing operations. In
future years, increases in pre-tax earnings will lower the effective income tax
rate due to the leverage effect that higher pre-tax earnings have on the
relatively fixed goodwill amortization which is not deductible for income tax
purposes.
Earnings for 1993 were impacted by charges incurred in the early retirement of
debt which are accounted for as an extraordinary item. In connection with the
debt restructuring, the Company extinguished $146.0 million of debt and expensed
the related costs of prepaying such debt and related derivatives. The
restructuring resulted in an extraordinary pre-tax loss of $25 million ($15
million, net of tax).
In 1991, the Company adopted Statement of Financial Accounting Standards No.
106, "Employers Accounting for Postretirement Benefits Other Than Pensions" and
elected the immediate recognition option of the statement, which was accounted
for as a cumulative change in accounting principle. The net after-tax charge
to earnings in 1991, as a result of the adoption of SFAS No. 106, was equal to
the accumulated and vested postretirement benefits obligation to existing
retirees and active employees as of the date of adoption, which amounted to
$40.7 million.
Net earnings were $247.1 million or 1.3% of sales in 1993, compared to $207.5
million or 1.1% of sales in 1992 and $199.3 million or 1.0% of sales in 1991.
Net earnings per share amounted to $1.74 in 1993, $1.48 in 1992 and $1.44 in
1991. Net earnings in 1993 were impacted by $.04 per share as a retroactive
adjustment due to the recent federal tax rate increase. Net earnings for 1993
were also impacted by the extraordinary loss on the early retirement of debt of
$.11 as described above and a net pre-tax gain of $28.5 million or $.12 per
share attributable to the resolution of the "Rule of 80" litigation, offset by
various charges as described above. Earnings per share in 1993 were also
decreased by $.03 per share due to the $7.6 million of operating expenses
associated with the legal settlement related to meat products in California and
the severance programs stemming from the Company's expense reduction program as
described above. Earnings per share for fiscal 1992 were impacted by a loss of
approximately $.10 per share principally on the sale of 74 Jewel Osco
combination food and drug stores. Earnings per share for fiscal 1991 were
impacted by several items including a charge of $.29 per share from the adoption
of the immediate recognition option of SFAS No. 106, income of $.45 per share
resulting from net gains from the sales of assets, primarily Alpha Beta Company,
and a charge of $.09 per share for increases to the reserve for attorneys' fees
and claims relating to the 1985 Salmonella incident.
Average shares outstanding were 142.2 million in 1993, 140.3 million in 1992 and
138.4 million in 1991.
At the beginning of 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if effective at the
beginning of fiscal 1989 which was accounted for as a cumulative change in
accounting principle. Adoption of this standard resulted in the restatement of
the Company's prior year financial statements. Net earnings were increased by
$1.1 million or $.01 per share in 1992 and decreased by $0.2 million with no per
share impact in 1991.
Contingencies
_____________
The Northern Division of Lucky Stores, Inc. is a defendant in the Stender
litigation which is described in the section entitled "Legal Proceedings" in the
Notes to Consolidated Financial Statements. A tentative settlement has been
reached in that litigation. The Company believes that future amounts payable
for damages will not exceed existing reserves or have a material impact on its
financial condition.
The Company has identified environmental contamination sites related primarily
to underground petroleum storage tanks at various store, warehouse, office and
manufacturing facilities (related to current operations as well as previously
disposed of businesses). Reserves have been established for each environmental
contamination site unless an unfavorable outcome is remote. Although the
ultimate outcome and expense of environmental remediation is uncertain, the
Company believes that required remediation and continuing compliance with
environmental laws in excess of current reserves will not have a material
adverse effect on the financial condition or operating results of the Company.
See the section entitled "Contingencies" in the Notes to Consolidated Financial
Statements.
The Company, from time to time, has disposed of leased properties and may retain
certain contingent lease liabilities, either by contract or law. Although the
Company is unaware of any material assertions against it from such dispositions,
such claims may arise in the future. If such claims were asserted, the expense
to the Company would consist of unpaid lease obligations, such as rents, which
may be offset by subletting the property, negotiating favorable lease
terminations, operating the facilities or applying existing reserves.
Inflation
_________
In recent years, the impact of inflation on the Company's results of operations
has been moderate. As operating expenses and inventory costs have increased,
the Company, to the extent permitted by competition, has recovered these
increases in costs by increasing prices over time. The competitive environment
in which the Company operates continues to challenge it to become more cost
efficient as its ability to recover increased costs by raising prices may be
diminished.
The Company uses the LIFO (last-in, first-out) method of accounting for the
majority of its inventories. Under this method, the cost of merchandise sold
reported in the financial statements approximates current costs and thus reduces
the distortion in reported earnings due to increasing costs.
The historical costs of property, plant and equipment recorded by the Company
were incurred over a period of many years. The cost of replacement of property,
plant and equipment is generally greater than the cost on the books of the
Company as a result of inflation that has occurred over the years since the
property, plant and equipment were placed in service.
Organizational Changes
______________________
The Company is currently implementing changes which it believes will enhance its
organizational effectiveness. Included among these organizational changes is
the centralization of certain administrative functions, including the
information technology, accounting, real estate and construction functions.
These organizational changes will be implemented over the next several years and
while the Company believes these changes will ultimately enhance its future
operating results, the impact cannot be reasonably estimated.
The Company is also currently engaged in an effort to re-engineer its supply
chain process. This involves streamlining the Company's buying, warehousing,
distribution and merchandising activities. Major components of this effort
include the development of new software to support these activities, as well as
centralized management of certain buying and warehousing activities. The goal
is to reduce overall supply chain costs. The re-engineering effort will be
continuing over the next several years and while the Company believes this
effort will ultimately enhance its future operating results, the impact cannot
be reasonably estimated.
Financial Condition
___________________
Cash Flows - Operating Activities
_________________________________
Net cash provided by operating activities amounted to $690.4 million, $470.8
million and $469.8 million in 1993, 1992 and 1991, respectively. The largest
component of operating cash flow is depreciation and amortization which amounted
to $384.3 million, $370.4 million and $386.9 million in 1993, 1992 and 1991,
respectively. The next largest component of operating cash flow is annual net
earnings which amounted to $247.1 million, $207.5 million and $199.3 million for
1993, 1992 and 1991, respectively. All other components of operating cash flow
amounted to cash provided of $59.0 million in 1993 and cash used of $107.1
million and $116.4 million in 1992 and 1991, respectively.
Cash Flows - Investing Activities
_________________________________
Net cash used in investing activities in fiscal 1993 amounted to $555.8 million,
compared to net cash provided by investing activities of $92.1 million in 1992
and net cash used in investing activities of $57.2 million in 1991. The
increase in cash used in investing activities in 1993 when compared to 1992 is
primarily due to the increase in cash capital expenditures to $593.8 million in
1993 from $386.1 million in 1992 as well as proceeds from the sale of assets in
1992 of $478.2 million, primarily from the sale of 74 Jewel Osco combination
food and drug stores. The decrease in net cash used in investing activities in
1992 when compared to 1991 was due primarily to the proceeds from the 1992 Jewel
Osco sale described above compared to proceeds from the sale of assets in 1991
of $297.7 million, primarily from the sale of Alpha Beta Company and the 59 Osco
Drug stores.
Cash capital expenditures amounted to $593.8 million in 1993, $386.1 million in
1992 and $354.9 million in 1991. Additional capital expenditures represented
by the net present value of leases amounted to $59.1 million in 1993, $90.5
million in 1992 and $23.7 million in 1991. The increase in capital expenditures
in 1993 and 1992, when compared to 1991, reflects the effects of the Company's
expanded capital expenditure program announced in 1992. During fiscal 1993, the
Company opened 39 new stores and remodeled 233 stores. Capital expenditures for
fiscal 1994, including the net present value of leases, are expected to
approximate $700 million and will be funded through cash flow from operations
and the utilization of existing credit facilities. The Company currently plans
to open 40 new stores and remodel an additional 210 stores in 1994.
Cash Flows - Financing Activities
_________________________________
Net cash used in financing activities amounted to $129.1 million in 1993, $580.1
million in 1992 and $418.6 million in 1991. Proceeds from long-term borrowings
amounted to $100 million in 1993, $401.6 million in 1992 and $239.5 million in
1991. Proceeds in 1993 were from the issuance of $100 million of Medium Term
Notes, Series A. Proceeds in 1992 included the Company's issuance of $250
million of 9-1/8% Notes due April 1, 2002 and $150 million of Medium Term Notes,
Series A. Proceeds in 1991 included the issuance of $175 million of 7-1/4%
Convertible Subordinated Notes due 2001. Proceeds from each of these debt
issues were used to repay debt with earlier maturity dates.
Reductions in debt, net of the proceeds of new borrowings, amounted to $70.5
million in 1993, $533.5 million in 1992 and $367.2 million in 1991, primarily
from reductions of the bank term loan, the bank revolving credit facility and
recurring payments on mortgages secured by real estate. A large portion of the
debt reduction in 1992 and 1991 was made possible by the receipt of proceeds
from the disposition of stores (see footnote entitled "Disposition of
Divisions"). The issuance of the 9-1/8% Notes, the Medium Term Notes, the
Convertible Subordinated Notes and the prepayment of a portion of the Company's
indebtedness under the bank credit agreement have reduced the Company's
mandatory debt payments and made more of the Company's cash flow available for
working capital and capital expenditures.
Liquidity and Financial Ratios
______________________________
The Company believes that its cash flow from operations, supplemented by credit
available under the Company's committed and uncommitted credit facilities, as
well as its ability to refinance debt, will be adequate to meet the Company's
presently identifiable requirements, including debt and interest payments due
over the next 5 years. At year-end 1993, the Company had $125 million in
committed lines of credit and $335 million in uncommitted lines of credit. Also
at year-end 1993, the Company's principal bank credit agreement consisted of an
$800 million revolving credit facility, which is used for direct borrowings and
as backup support for commercial paper. At year-end 1993, the Company had $578
million of debt outstanding under these committed and uncommitted credit
facilities, leaving unused committed borrowing capacity of $347 million.
The Company's senior and subordinated debt and its commercial paper were
upgraded by Standard & Poor's Corporation during 1993. The senior debt was
upgraded from BBB- to BBB; the subordinated debt was upgraded from BB+ to BBB-;
and the commercial paper was upgraded from A-3 to A-2.
One measure commonly used in the financial community to measure a company's
ability to service debt and make interest payments is through a FIFO-EBITDA
analysis. The FIFO-EBITDA calculation eliminates non-cash charges to earnings.
FIFO-EBITDA is equal to earnings before interest, income taxes, depreciation and
amortization, the LIFO charge to earnings, an extraordinary item and the
cumulative effect of a change in accounting principle. FIFO-EBITDA should not
be considered an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flows as a measure of
liquidity. FIFO-EBITDA for the last three years is as follows:
(In millions of dollars) 1993 1992 1991
_________________________________________________________________
Earnings before income taxes,
an extraordinary item and the
cumulative effect of a change
in accounting principle $ 480.8 $378.3 $ 438.5
LIFO charge 7.2 16.5 34.9
Interest expense 189.8 214.4 265.1
Depreciation and amortization 384.3 370.4 386.9
________ ______ ________
FIFO-EBITDA $1,062.1 $979.6 $1,125.4
======== ====== ========
Cash paid for interest expense $175.2 $192.7 $251.2
======== ====== ========
The percentage of cash paid for interest expense to FIFO-EBITDA was 16.5%, 19.7%
and 22.3% for 1993, 1992 and 1991, respectively.
The Company's ratio of total debt (debt plus obligations under capital leases)
to total capitalization (total debt plus common shareholders' equity) amounted
to 55.4%, 59.3% and 67.2% at year-end 1993, 1992 and 1991, respectively.
The Company's ratio of earnings to fixed charges for 1993, 1992 and 1991 were
2.60 to 1, 2.32 to 1 and 1.91 to 1, respectively. In the computation of the
ratio of earnings to fixed charges for the Company, earnings consist of earnings
before income taxes, extraordinary items and the cumulative effect of changes
in accounting principles, less gain (loss) on sale of assets, other, plus fixed
charges (adjusted for capitalized interest). Fixed charges consist of interest,
whether expensed or capitalized (including the amortization of debt expense),
plus the amount of rental expense which is representative of the interest factor
in the particular case. The improvement in the ratio from 1991 to 1993 is
primarily due to reduced interest expense resulting from lower average
outstanding debt and lower interest rates, as well as higher pre-tax income from
continuing operations in the current year.
Working capital amounted to negative $58.3 million at year-end 1993 compared to
a positive $101.2 million at year-end 1992 and $162.9 million at year-end 1991.
Fluctuations in the components of working capital are customary. Other than the
need to maintain merchandise inventories, there are no unusual industry
practices or requirements relating to working capital items.
Short-term borrowings are defined as those amounts borrowed directly under, or
supported by, bank revolving credit facilities or bank lines of credit,
including commercial paper. The Company had short-term borrowings of $578.0
million, $559.0 million and $713.5 million at the end of 1993, 1992 and 1991,
respectively. These amounts were classified as long-term debt at each year-end.
Average short-term borrowings amounted to $566.5 million in 1993, $438.4 million
in 1992 and $633.5 million in 1991. The maximum amount of short-term borrowings
outstanding was $759.0 million in 1993, $690.5 million in 1992 and $841.2
million in 1991. Average interest rates charged to the Company on short-term
borrowings were 3.6% in 1993, 4.2% in 1992 and 6.5% in 1991.
Recent Developments
___________________
On February 18, 1994, the Company filed a shelf registration statement with the
Securities and Exchange Commission to issue up to $800 million in debt
securities. Debt issued pursuant to the registration statement is expected to
be used to retire existing debt obligations and for other general corporate
purposes.
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
American Stores Company
We have audited the accompanying consolidated balance sheets of American Stores
Company and subsidiaries as of January 29, 1994, January 30, 1993 and February
1, 1992, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the three fiscal years in the period ended
January 29, 1994. 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Stores
Company and subsidiaries at January 29, 1994, January 30, 1993 and February 1,
1992; and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended January 29, 1994, in
conformity with generally accepted accounting principles.
As discussed in the notes to the financial statements, in 1993 the Company
changed its method of accounting for income taxes and in 1991 it changed its
method of accounting for postretirement health care benefits.
ERNST & YOUNG
March 21, 1994
Salt Lake City, Utah
<PAGE>
<TABLE>
Consolidated Statements of Earnings
(In thousands, except per share data)(1) 1993 1992(2) 1991(2)
___________________________________________________________________________________
<S> <C> <C> <C>
Sales $18,763,439 $19,051,180 $20,822,956
Cost of merchandise sold, including ware-
housing and transportation expenses 13,815,607 14,075,787 15,615,734
___________ ___________ ___________
Gross profit 4,947,832 4,975,393 5,207,222
Operating and administrative expenses 4,305,950 4,352,079 4,605,234
___________ ___________ ___________
Operating profit 641,882 623,314 601,988
Other income (expense):
Interest income 4,568 4,477 2,861
Interest expense (189,773) (214,394) (265,098)
Gains (losses) on asset sales, other 24,128 (35,116) 98,717
___________ ___________ ___________
Total other income (expense) (161,077) (245,033) (163,520)
___________ ___________ ___________
Earnings before income taxes, extra-
ordinary item and cumulative effect
of a change in accounting principle 480,805 378,281 438,468
Federal and state income taxes (218,715) (170,815) (198,452)
___________ ___________ ___________
Earnings before extraordinary item and
cumulative effect of a change in
accounting principle 262,090 207,466 240,016
Extraordinary item -- early retirement
of debt - net of taxes (15,000)
Cumulative effect of a change in accounting
principle--
Postretirement health care benefits (40,734)
___________ ___________ ___________
Net earnings $ 247,090 $ 207,466 $ 199,282
=========== =========== ===========
Average shares outstanding 142,202 140,314 138,364
Earnings per share before extraordinary
item and cumulative effect of a
change in accounting principle $1.85 $1.48 $1.73
Extraordinary item (.11)
Cumulative effect of a change in
accounting principle (.29)
___________ ___________ ___________
Net earnings per share $1.74 $1.48 $1.44
=========== =========== ===========
(1) Restated as necessary to reflect the March 1994 and July 1991 two-for-one stock
splits.
(2) Restated to reflect adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," as if effective at the beginning of fiscal
1989.
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
Year-end
_____________________________________
(In thousands of dollars) 1993 1992(1) 1991(1)
___________________________________________________________________________________
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 59,580 $ 54,048 $ 71,292
Receivables 282,124 285,187 263,395
Inventories 1,539,610 1,576,499 1,694,330
Prepaid expenses 43,265 44,523 67,491
Deferred income tax benefits 71,230 55,664 57,068
__________ __________ __________
Total current assets 1,995,809 2,015,921 2,153,576
Property, Plant and Equipment, at cost
Land 541,396 496,594 574,338
Buildings 1,109,737 1,017,665 1,121,226
Fixtures and equipment 2,092,934 1,887,063 1,919,779
Leasehold improvements 654,123 546,108 540,481
__________ __________ __________
4,398,190 3,947,430 4,155,824
Less accumulated depreciation and
amortization 1,694,150 1,505,857 1,485,653
__________ __________ __________
Net property, plant and equipment 2,704,040 2,441,573 2,670,171
Property Under Capital Leases, less
accumulated amortization of $108,394
in 1993, $99,689 in 1992 and $113,520
in 1991 97,127 108,623 124,903
Goodwill, less accumulated amortization
of $311,823 in 1993, $258,336 in 1992
and $204,849 in 1991 1,827,334 1,880,821 1,934,308
Other Assets 303,124 316,855 315,092
__________ __________ __________
$6,927,434 $6,763,793 $7,198,050
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets (concluded)
Year-end
_____________________________________
(In thousands of dollars) 1993 1992(1) 1991(1)
___________________________________________________________________________________
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 66,830 $ 54,699 $ 114,409
Current obligations under capital leases 9,708 9,569 10,680
Accounts payable 958,272 958,083 961,952
Accrued payroll and benefits 303,160 301,653 307,884
Current portion of self-insurance reserves 212,891 202,445 190,752
Income taxes payable 118,279 32,072 18,692
Other current liabilities 384,959 356,185 386,318
__________ __________ __________
Total current liabilities 2,054,099 1,914,706 1,990,687
Long-term Debt,
less current maturities 2,003,866 2,086,464 2,560,281
Obligations Under Capital Leases,
less current obligations 87,595 97,584 113,208
Self-insurance Reserves, less current portion 520,010 522,259 483,697
Deferred Income Taxes 345,760 399,482 438,248
Other Liabilities 173,819 199,284 245,499
Shareholders' Equity (2)
Common stock of $1.00 par value, authorized
200,000,000 shares; issued 144,542,156
shares 144,542 72,271 72,271
Additional paid-in capital 190,173 262,746 292,026
Retained earnings 1,432,032 1,241,847 1,085,388
Less cost of treasury stock; 2,038,454 shares
in 1993, 2,682,214 shares in 1992 and
6,012,358 shares in 1991 (24,462) (32,850) (83,255)
__________ __________ __________
Total shareholders' equity 1,742,285 1,544,014 1,366,430
__________ __________ __________
$6,927,434 $6,763,793 $7,198,050
========== ========== ==========
(1) Restated to reflect adoption of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," as if effective at the beginning of
fiscal 1989.
(2) Restated as necessary to reflect the March 1994 two-for-one stock split.
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
(In thousands of dollars) 1993 1992(1) 1991(1)
___________________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 247,090 $ 207,466 $ 199,282
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Cumulative effect of a change in
accounting principle 67,890
Depreciation and amortization 384,307 370,439 386,916
Net loss (gain) on asset sales 16,060 34,227 (100,519)
Deferred income taxes (53,722) (38,766) 21,105
Self-insurance reserves and other (2) (45,610) (37,114) (11,021)
(Increase) decrease in current assets:(2)
Receivables 3,063 (21,792) (49,966)
Inventories 36,889 (3,864) 7,436
Prepaid expenses (14,308) 24,372 (10,394)
Increase (decrease) in current liabilities:(2)
Accounts payable 189 (3,869) 6,119
Other current liabilities 28,774 (67,466) 62,723
Accrued payroll and benefits 1,507 (6,231) (4,283)
Income taxes payable 86,207 13,380 (105,446)
__________ __________ __________
Total adjustments 443,356 263,316 270,560
__________ __________ __________
Net cash provided by operating activities 690,446 470,782 469,842
__________ __________ __________
Cash flows from investing activities:
Expended for property, plant and equipment (593,785) (386,106) (354,940)
Proceeds from disposition of divisions 429,952 286,287
Proceeds from sale of assets 38,007 48,271 11,458
__________ __________ __________
Net cash (used in) provided by
investing activities (555,778) 92,117 (57,195)
__________ __________ __________
Cash flows from financing activities:
Proceeds from long-term borrowing 100,000 401,602 239,528
Reduction of long-term debt (170,467) (935,128) (606,773)
Principal payments for obligations under
capital leases (2) (9,850) (16,735) (16,719)
Proceeds from exercise of stock options 7,532 14,553 7,235
Other changes in equity 554 6,572 1,674
Cash dividends (56,905) (51,007) (43,592)
__________ __________ __________
Net cash used in financing activities (129,136) (580,143) (418,647)
__________ __________ __________
Net increase (decrease) in cash and cash
equivalents 5,532 (17,244) (6,000)
Cash and cash equivalents:
Beginning of year 54,048 71,292 77,292
__________ __________ __________
End of year $ 59,580 $ 54,048 $ 71,292
========== ========== ==========
(1) Restated to reflect adoption of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," as if effective at the beginning of
fiscal 1989.
(2) Amounts reflected are net of effects of the disposition of divisions.
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity (1)
Additional
Common Paid-In Retained Treasury
(In thousands, except per share data) Stock Capital Earnings Stock Total
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balances at beginning of 1991,
as previously reported $ 36,136 $324,812 $1,078,688 $(88,815) $1,350,821
Restatement (2) (148,990) (148,990)
________ ________ __________ ________ __________
Balances at beginning of 1991,
restated (2) 36,136 324,812 929,698 (88,815) 1,201,831
Net earnings -- 1991 (2) 199,282 199,282
Issuance of 378,314 shares of
stock for stock options and awards 1,647 5,588 7,235
Common dividends ($.32 per share) (43,592) (43,592)
Issuance of 72,271,078 shares of
stock to effect a 2-for-1 stock
split 36,135 (36,135) 0
Purchase of 696 shares for treasury (28) (28)
Other 1,702 1,702
________ ________ __________ ________ __________
Balances at year-end 1991 72,271 292,026 1,085,388 (83,255) 1,366,430
Net earnings -- 1992 (2) 207,466 207,466
Issuance of 1,097,770 shares of
stock for stock options and awards 29 14,524 14,553
Common dividends ($.36 per share) (51,007) (51,007)
Stock Purchase Incentive Plans
including issuance of 2,273,000
shares (34,845) 35,892 1,047
Purchase of 626 shares for treasury (11) (11)
Other 5,536 5,536
________ ________ __________ ________ __________
Balances at year-end 1992 72,271 262,746 1,241,847 (32,850) 1,544,014
Net earnings -- 1993 247,090 247,090
Issuance of 524,258 shares of
stock for stock options and awards 579 6,953 7,532
Common dividends ($.40 per share) (56,905) (56,905)
Stock Purchase Incentive Plans including
issuance of 120,000 shares (3,389) 1,446 (1,943)
Declaration of 72,271,078 shares of
stock to effect a 2-for-1 stock
split 72,271 (72,271) 0
Purchase of 498 shares for treasury (11) (11)
Other 2,508 2,508
________ ________ __________ ________ __________
Balances at year-end 1993 $144,542 $190,173 $1,432,032 $(24,462) $1,742,285
======== ======== ========== ======== ==========
(1) Restated as necessary to reflect the March 1994 two-for-one stock split.
(2) Restated to reflect adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," as if effective at the beginning of fiscal 1989.
See notes to consolidated financial statements
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Significant Accounting Policies
_______________________________
Fiscal Year. The fiscal year of the Company ends on the Saturday nearest to
January 31. All references herein to "1993", "1992" and "1991" mean the 52-week
fiscal years ended January 29, 1994, January 30, 1993 and February 1, 1992,
respectively.
Basis of Consolidation. The consolidated financial statements include the
accounts of American Stores Company and all subsidiaries. Accordingly, all
references herein to "American Stores Company" include the consolidated results
of its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Inventories. The Company uses the LIFO (last-in, first-out) method of
accounting for the majority of its inventories. Under this method, the cost of
merchandise sold reported in the financial statements approximates current costs
and thus reduces the distortion in reported earnings due to increasing cost.
The remaining inventories are computed by either the FIFO (first-in, first-out)
or average cost method.
Industry Segment. The Company operates in a single industry segment, the retail
sale of food and drug merchandise.
Cash and Cash Equivalents. The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
The carrying amounts reported in the balance sheet for cash and cash equivalents
approximate those assets' fair value.
Depreciation and Amortization. Depreciation and amortization is provided on a
straight-line basis over the estimated useful lives of owned assets. Leasehold
improvements and leased properties under capital leases are amortized over the
estimated useful life of the property or over the term of the lease, whichever
is shorter.
Goodwill. Goodwill, principally from the acquisition of Lucky Stores, Inc. in
1988, represents the excess of cost over fair value of net assets acquired and
is being amortized over 40 years using the straight-line method.
Costs of Opening and Closing Stores. The costs of opening new stores are
charged against earnings as incurred. When operations are discontinued and a
store is closed, the remaining investment, net of salvage value, is charged
against earnings and, for leased stores, a provision is made for the remaining
lease liability, net of expected sublease income.
Income Taxes. The Company provides for deferred income taxes or credits as
temporary differences arise in recording income and expenses between financial
reporting and tax reporting. Amortization of goodwill is not deductible for
purposes of calculating income tax provisions.
Net Earnings Per Share. Net earnings per share are determined by dividing the
weighted average number of shares outstanding during the year into net earnings.
Common share equivalents in the form of stock options are excluded from the
calculation since they have no material dilutive effect on per share figures.
The assumed conversion of subordinated convertible debt into common stock had
no material dilutive effect on net earnings per share in fiscal years 1991 to
1993. However, in the fourth quarters of 1993 and 1992, the assumed conversion
of subordinated convertible debt and stock options into common stock resulted
in dilution of earnings per share greater than 3%.
Environmental Remediation Costs. Costs incurred to investigate and remediate
contaminated sites, caused primarily by defective underground petroleum storage
tanks, are expensed unless the remediation extends the economic useful life of
the assets employed at the site.
Self-insurance. The Company is self-insured for property loss, workers'
compensation, general liability and automotive liability, subject to specific
retention levels. The Company is also self-insured for health care claims for
eligible active and retired associates. Consulting actuaries assist the Company
in determining its liability for self-insured claims. The Company is required
in certain cases to obtain letters of credit to support its self-insured status.
At year-end 1993, the Company's self-insured liabilities were supported by
approximately $300 million of undrawn letters of credit. Self-insured
liabilities, with the exception of postretirement health care benefits, are not
discounted.
Business and Properties
_______________________
The Company, through its subsidiaries, is engaged primarily in the operation of
retail stores, selling food and drug merchandise through 1,695 retail food, drug
and combination food/drug stores in 27 states as of year-end 1993, which
includes 148 jointly operated Jewel Osco combination stores which are counted
as two separate stores. The Company and its subsidiaries also own or lease
office facilities, land held for future retail locations and various
manufacturing, warehousing and distribution facilities throughout the country.
Inventories
___________
Approximately 93% of inventories are accounted for using the LIFO method for
inventory valuation. If the FIFO and average cost methods had been used,
inventories would have been $303.3 million, $296.1 million and $295.7 million
higher at year-end 1993, 1992 and 1991, respectively. The LIFO charge to
earnings was $7.2 million in 1993, $16.5 million in 1992 and $34.9 million in
1991.
Advertising Expense
___________________
Advertising expense from comparable operations (excluding the disposed divisions
described below) amounted to $169.5 million in 1993, $172.7 million in 1992 and
$172.5 million in 1991. Total advertising expense amounted to $174.6 million
and $196.6 million in 1992 and 1991, respectively.
Stock Split
___________
On March 21, 1994, the Board of Directors declared a two-for-one stock split
which will be payable to shareholders on April 21, 1994. All references to the
number of shares and per share amounts have been restated to reflect the effect
of the split.
Extraordinary Item
__________________
Earnings for 1993 were impacted by charges incurred in the early retirement of
debt which are accounted for as an extraordinary item. In connection with the
debt restructuring, the Company extinguished $146.0 million of debt and expensed
the related costs of prepaying such debt and related derivatives. The
restructuring resulted in an extraordinary pre-tax loss of $25 million ($15
million, net of tax) or $.11 per share.
Disposition of Divisions
________________________
In April 1992, the Company sold 74 Jewel Osco combination stores and related
support facilities located in Texas, Arkansas, Oklahoma and Florida, with a
basis of $454.2 million, for $430.7 million in cash. The assets sold consisted
primarily of property, plant, equipment and inventories. In the second quarter
of 1991, the Company sold 100% of its stock in Alpha Beta Company for $241
million in cash (subject to certain balance sheet adjustments) and the
assumption of $10 million in capitalized lease obligations. The Company also
sold 51 Osco stores in the second quarter of 1991, consisting primarily of
property, plant, equipment and inventories, for $52.6 million in cash. The net
book value of the assets sold in 1991 was $147.0 million.
Restatement
___________
At the beginning of fiscal 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS No. 109) as
if it were effective at the beginning of fiscal 1989. SFAS No. 109 provides
that income taxes are accounted for using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial basis and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of SFAS No. 109,
income tax expense was determined using the deferred method. Deferred tax
assets and liabilities were based on items of income and expense that were
reported in different years in the financial statements and tax returns and were
measured at the tax rate in effect in the year the differences originated. In
addition, SFAS No. 109 provides that deferred taxes are established for the
value of assets acquired and liabilities assumed in business combinations
instead of reducing their reported values to net-of-tax amounts. Therefore,
amounts in the balance sheet previously reported net-of-tax have been restated
to their pre-tax amounts and the Company's prior year financial statements have
been restated. Net earnings were increased by $1.1 million or $.01 per share
in 1992 and decreased by $.2 million with no per share impact in 1991. Retained
earnings were decreased by $148.0 million at year-end 1992 and $149.1 million
at year-end 1991. Retained earnings at the beginning of 1991 were reduced by
$149.0 million. The effect of the adoption of SFAS No. 109 on total assets was
an increase of $218.8 million and $243.4 million in 1992 and 1991, respectively.
Cumulative Effect of Accounting Change
______________________________________
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions,"
effective at the beginning of fiscal year 1991, resulting in a benefit
obligation of $40.7 million in 1991 (net of taxes of $27.2 million) recognized
as a cumulative effect of an accounting change. In prior years, the Company
charged expenses relating to postretirement benefits to earnings under the pay-
as-you-go method. The Company elected immediate recognition of a transition
obligation equal to the accumulated and vested postretirement benefit
obligations to existing retirees and active associates as of the date of
adoption. The total cumulative effect of this accounting change was to decrease
net earnings by $.29 per share in 1991.
Debt
____
In 1988, the Company entered into an agreement with a group of banks that
provided a $2.1 billion amortizing term loan and a $1.0 billion revolving credit
facility, both of which expire May 31, 1996. During 1993, the balance of the
amortizing term loan was repaid. At year-end 1993, the banks' commitment under
the revolving credit facility was $800 million. Interest rates for borrowings
under the facility are established at the time of borrowing, through three
different pricing options, one of which is the prime rate. Terms of the
revolving credit facility provide for borrowings from participating banks or
borrowing through issuance of commercial paper which is supported by the
facility.
At year-end 1993, the Company also had lines of credit with various banks which
allow it to borrow up to $460 million, of which $125 million was committed and
$335 million was uncommitted. The lines of credit are used for short-term
borrowings and are reviewed annually for renewal. Commitment fees are paid for
the committed lines of credit.
The outstanding debt under the credit facilities described above has been
classified as long-term debt since the total amount outstanding did not exceed
the amount of bank commitments extending beyond one year.
On February 18, 1994, the Company filed a shelf registration statement with the
Securities and Exchange Commission to issue up to $800 million in debt
securities. Debt issued pursuant to the registration statement will be used to
retire existing debt obligations and for other general corporate purposes.
In 1993, the Company issued $100 million of Medium Term Notes, Series A at an
average interest rate of 7.2%. In 1992, the Company issued $250 million of 9-
1/8% Notes due April 1, 2002 and $150 million of Medium Term Notes, Series A at
an average interest rate of 8.4%.
In 1991, the Company issued $175 million of 7-1/4% Convertible Subordinated
Notes due 2001. The notes are convertible, at the option of the holder, at any
time prior to maturity, unless previously redeemed, into 44.444 shares of common
stock per $1,000 principal amount of notes (equivalent to $22.50 per share of
common stock). On and after September 15, 1994, the notes may be redeemed at
the option of the Company at predetermined prices.
The aggregate amounts of debt maturing in each of the next five fiscal years are
listed below:
(In thousands of dollars)
_____________________________________________
1994 $ 66,830
1995 133,292
1996 783,944
1997 59,613
1998 75,842
Thereafter 951,175
__________
$2,070,696
==========
The Company's various loans secured by real estate are collateralized by
properties with a net book value of $199.1 million at year-end 1993.
The carrying amounts of the Company's bank borrowings with variable interest
rates approximate fair value. The fair value of the Company's borrowings with
fixed interest rates is estimated using discounted cash flow analyses, based on
current market rates where available, or on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The fair value of
outstanding debt as of year-end 1993 was $2.3 billion compared to the carrying
value of $2.1 billion.
<TABLE>
A summary of debt is as follows:
(In thousands of dollars) 1993 1992 1991
__________________________________________________________________________________________
<S> <C> <C> <C>
Public Debt (unsecured):
Medium Term Notes--fixed interest rates due
1997 through 2003--average interest rate
7.9% $ 250,000 $ 150,000
9-1/8% Notes due 2002 248,868 248,779
7-1/4% Convertible Subordinated Notes due 2001 174,997 174,997 $ 175,000
9-3/4% Eurobond Notes due 1994 100,000 100,000 100,000
Bank Borrowings (unsecured):
Term loan--variable interest rates,
effectively due 1996--average interest rates
3.8% in 1993, 5.1% in 1992 and 7.1% in 1991 100,000 716,000
Revolving credit facility--variable
interest rates, effectively due 1996--
average interest rates 3.6% in 1993, 4.2%
in 1992 and 6.4% in 1991 450,000 300,000 300,000
Lines of credit and commercial paper--
variable interest rates, effectively
due 1996 128,000 259,000 413,519
Other borrowings--due 1992 through 1995--
average interest rates 9.5% in 1993,
9.4% in 1992 and 9.2% in 1991 140,000 155,000 182,000
9.65% due in 1996 138,803 138,803 138,803
Other Unsecured Debt:
9.75% due in 1999 160,000 160,000 160,000
10.63% due in 2004 108,893 108,893 108,893
Other--due through 2004--average interest
rates 9.8% in 1993, 9.9% in 1992
and 9.5% in 1991 58,353 60,802 64,147
Debt Secured by Real Estate:
Fixed interest rates--due through 2014--
average interest rate 13.7% in 1993 112,782 184,889 316,328
__________ __________ __________
Outstanding debt 2,070,696 2,141,163 2,674,690
Less current maturities 66,830 54,699 114,409
__________ __________ __________
Long-term debt $2,003,866 $2,086,464 $2,560,281
========== ========== ==========
</TABLE>
Interest Costs
______________
The Company capitalized interest costs associated with construction projects of
$3.4 million, $2.0 million and $4.0 million in 1993, 1992 and 1991,
respectively.
The Company made cash payments for interest (net of amounts capitalized) of
$175.2 million, $192.7 million and $251.2 million in 1993, 1992 and 1991,
respectively.
Leases
______
The Company leases retail stores, offices, warehouses and distribution
facilities. Initial lease terms generally range from 20 to 25 years, plus
renewal options, and may provide for contingent rent based on sales volume
in excess of specified levels.
The summary below shows the aggregate future minimum rent commitments at
year-end 1993 for both capital and operating leases. Operating leases are
shown net of an aggregate $65.5 million of minimum rent income receivable
under non-cancellable subleases. Operating leases also exclude the
amortization of acquisition-related fair value adjustments.
Operating Capital
(In thousands of dollars) Leases Leases
______________________________________________________________________________
1994 $ 148,751 $ 20,137
1995 141,375 19,072
1996 132,771 18,222
1997 123,125 16,405
1998 114,129 14,628
Thereafter 861,281 78,017
__________ ________
Total minimum rent commitments $1,521,432 166,481
==========
Less executory costs (such as taxes, insurance
and maintenance) included in capital leases 2,530
________
Net minimum lease payments 163,951
Less amount representing interest 66,648
________
Obligations under capital leases, including $9.7
million due within one year $ 97,303
========
Rent expense, excluding the amortization of acquisition-related fair value
adjustments of $14.9 million in 1993, $15.0 million in 1992 and $14.8 million
in 1991, was as follows:
Minimum Sublease Contingent Total
(In thousands of dollars) Rent Rent Net Rent Rent
________________________________________________________________________________
1993 $173,910 $ 9,133 $164,777 $29,809 $194,586
1992 163,070 10,705 152,365 32,174 184,539
1991 172,146 9,896 162,250 35,410 197,660
Income Taxes
____________
At the beginning of fiscal 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." See the section
entitled "Restatement" in Notes to Consolidated Financial Statements.
Federal and state income taxes charged to earnings before extraordinary item and
the cumulative effect of changes in accounting principles are summarized below:
(In thousands of dollars) 1993 1992 1991
______________________________________________________________________________
Current:
Federal $200,845 $152,887 $164,608
State 51,932 41,773 44,975
Deferred:
Federal (26,510) (18,426) (8,601)
State (7,552) (5,419) (2,530)
________ ________ ________
Federal and state income taxes $218,715 $170,815 $198,452
======== ======== ========
The recently enacted Omnibus Budget Reconciliation Act of 1993 increased the
Company's annual effective federal tax rate by one percent retroactive to
January 1, 1993. The change in rates increased deferred taxes under SFAS No.
109, "Accounting for Income Taxes," and resulted in a one-time charge of
approximately $4.0 million or $.03 per share.
Cash payments of income taxes were $201.8 million, $199.2 million and $250.9
million in 1993, 1992 and 1991, respectively.
The Company's effective income tax rate differs from the statutory federal
income tax rate as follows:
(Percent of earnings before income taxes) 1993 1992 1991
______________________________________________________________________________
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income tax rate, net of federal
income tax effect 5.5 5.6 5.8
Goodwill amortization 4.5 5.6 4.8
Tax credits (0.3) (0.8) (0.6)
Other 0.8 0.8 1.3
____ ____ ____
Effective income tax rate 45.5% 45.2% 45.3%
==== ==== ====
Deferred tax benefits and liabilities as of year-end 1993 related to the
following temporary differences:
(In thousands of dollars) Benefits Liabilities Total
______________________________________________________________________________
Basis in fixed assets $ 32,711 $(257,392) $(224,681)
Self-insurance reserves 248,087 0 248,087
Purchase accounting valuation 93,982 (434,400) (340,418)
Compensation and benefits 32,740 (23,233) 9,507
Miscellaneous accruals 24,387 0 24,387
Other, net 8,588 0 8,588
________ _________ _________
$440,495 $(715,025) $(274,530)
======== ========= =========
No valuation allowances have been considered necessary in the calculation of
deferred tax benefits.
Stock Option Plans
__________________
The Company's 1989 Stock Option and Stock Award Plan (the "1989 Plan") provides
for the grant of options to purchase shares of common stock, the grant of stock
appreciation rights and the issuance of restricted stock awards for an aggregate
of up to 4.8 million shares of common stock, subject to certain antidilution
adjustments. The 1989 Plan also provides for the grant of certain stock
appreciation rights in connection with a Change of Control (as defined) of the
Company ("limited stock appreciation rights") for an aggregate of up to
approximately 3.0 million shares. At year-end 1993, there were 4.1 million
shares reserved for future grants under the 1989 Plan.
The Company's 1985 Stock Option and Stock Award Plan (the "1985 Plan") provides
for the grant of options to purchase shares of common stock, the grant of stock
appreciation rights and the issuance of restricted stock awards for an aggregate
of up to 4.0 million shares of common stock, subject to certain antidilution
adjustments. At year-end 1993, there were 0.2 million shares reserved for
future grants under the 1985 Plan.
At year-end 1993, there were 343,000 shares under stock options outstanding
under the 1989 Plan, 1,566,466 shares under stock options outstanding under the
1985 Plan and 273,938 shares under stock options outstanding under an expired
plan.
Compensation relating to stock option and award plans decreased pre-tax earnings
by $3.1 million in 1993, $7.6 million in 1992 and $6.1 million in 1991. The
average exercise price of stock options exercised during 1993 was $10.20 per
share. The average exercise price per share for outstanding options was $11.20,
$10.98 and $7.77 in 1993, 1992 and 1991, respectively.
A summary of stock options is as follows:
(In thousands of shares) 1993 1992 1991
______________________________________________________________________________
Outstanding at beginning of year 3,008 3,695 4,673
Granted 835
Exercised (715) (1,345) (675)
Forfeited (110) (177) (303)
_____ _____ _____
Outstanding at end of year 2,183 3,008 3,695
===== ===== =====
Exercisable at end of year 1,067 1,098 1,143
===== ===== =====
Reserved for future grants 4,298 4,217 4,939
===== ===== =====
Stock Purchase Incentive Plans
______________________________
In 1992, the Company's shareholders approved both the American Stores Company
Key Executive Stock Purchase Incentive Plan and the American Stores Company
Board of Directors Stock Purchase Incentive Plan (the "Plans"). The Plans are
intended to promote the long-term growth and financial success of the Company,
and to strengthen the link between management and shareholders by (a) providing
key executives and directors of the Company with an opportunity to significantly
increase their ownership of stock coupled with incentive awards based in part
on the performance of the Company's stock relative to the stock performance of
comparable companies in the retail food and drug industry, (b) providing this
opportunity in a manner that places key executives and directors at risk in the
event of poor Company performance and (c) encouraging the retention of such key
executives and directors by requiring the forfeiture of certain incentive awards
under the Plans if employment with the Company or service on the Board is
terminated.
During 1993 and 1992, the Company awarded to certain directors and key executive
officers the right to purchase a specified number of shares of the Company's
stock and extended to such directors and officers full recourse interest bearing
purchase loans to acquire the stock. The stock purchased by the directors and
officers with the purchase loans was issued from treasury shares. The purchase
loans have an eight year term and accrue interest at the "applicable federal
rate" (as determined by Section 1274(d) of the U.S. Internal Revenue Code)
compounded annually. Interest rates on the loans outstanding range from 5.3 to
7.0%. The acquisition price of the stock was the average high and low value on
the day acquired, as reported on the New York Stock Exchange. At year-end 1993,
2,393,000 shares were held by the executives and directors pursuant to the
Plans, having a corresponding loan balance of $45.8 million. The aggregate
principal of these notes outstanding is recorded as a reduction of additional
paid-in capital in the balance sheet.
Participants purchasing stock under the Plans are eligible for a deferred cash
incentive award which is generally payable at the end of a five-year performance
cycle. One-half of the deferred award will be based on the continuation of
service with the Company ("Service Component"), and the other half will be based
on the Company's relative stock price performance versus a selected group of
companies in the retail food and drug industry ("Performance Component"). The
maximum combined Performance Component and Service Component payable to
participants will not exceed the original principal amount of the purchase loan
plus accrued but unpaid interest. The estimated deferred cash incentive award
earned to date is recognized as a liability in the balance sheet.
Preferred Share Purchase Rights
_______________________________
During March 1988, the Board of Directors of the Company declared a distribution
of one Preferred Share Purchase Right for each outstanding share of the
Company's common stock.
Each Right entitles shareholders to purchase one four-hundredth of a share of
a new series of preferred stock at an exercise price of $62.50. The Rights will
be exercisable only if a person or group acquires 20% or more of the Company's
common stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Company's common stock.
The Rights will not apply to a 20% or greater position held by Mr. L. S. Skaggs,
the Company's Chairman, or certain other related parties. The Company will be
entitled to redeem the Rights at one-quarter cent per Right any time before a
20% or greater position has been acquired. Additionally, the Company may lower
the 20% threshold to not less than the greater of (i) any percentage greater
than the largest percentage of common stock known by the Company to be owned by
any person (other than L. S. Skaggs) and (ii) 10%.
If the Company is acquired in a merger or other business combination
transaction, each Right will "flip over" and entitle its holder to purchase, at
the Right's then current exercise price, a number of the acquiring company's
common shares having a market value at that time of twice the Right's exercise
price.
In addition, if a person or group acquired 20% or more of the outstanding
Company common stock, each Right will "flip in" and entitle all other holders
to purchase, at the Right's then current exercise price, a number of shares of
the Company's common stock having a market value of twice the Right's exercise
price. Further, at any time after a person or group acquires 20% or more of the
outstanding Company common stock but prior to the acquisition of 50% of such
stock, the Board of Directors may, at its option, exchange part or all of the
Rights (other than rights held by the acquiring person or group) for shares of
the Company's common stock at an exchange rate of one share of common stock for
each Right.
Postretirement Health Care Benefits
___________________________________
The Company provides certain health care benefits to eligible retirees of
certain defined employee groups under two unfunded plans, a defined dollar and
a full coverage benefit plan.
The following schedule sets forth the postretirement benefit liability included
in the Company's balance sheet:
Year-end
_____________________________
(In thousands of dollars) 1993 1992 1991
________________________________________________________________________________
Current retirees $45,389 $46,766 $47,494
Current active employees 20,893 19,100 17,477
Unrecognized gain 1,612 1,191 2,919
_______ _______ _______
Accumulated postretirement
benefit obligation ("APBO") 67,894 67,057 67,890
Plan assets at fair value 0 0
0
_______ _______ _______
APBO in excess of plan assets $67,894 $67,057 $67,890
======= ======= =======
The expense for postretirement health care benefits was approximately $5.9
million in 1993, $5.2 million in 1992, including adjustment of the accumulated
postretirement benefit obligation and $6.3 million in 1991, excluding
recognition of the transition obligation. See "Cumulative Effect of Accounting
Change" in Notes to Consolidated Financial Statements.
The net postretirement health care benefit expense for each year included the
following components:
(In thousands of dollars) 1993 1992 1991
______________________________________________________________________________
Service cost $1,027 $1,083 $ 1,083
Interest cost 4,827 5,197 5,197
Adjustment of APBO (1,032)
Recognition of APBO 67,890
______ ______ _______
$5,854 $5,248 $74,170
====== ====== =======
The Company assumed no increase in the cost of the defined dollar benefit plan
and a 13% annual rate of increase for health care costs for the full coverage
plan for 1993, decreasing to 4.9% by the year 2002. A discount rate of 7.4% was
used to determine the APBO.
Increasing the assumed health care cost trend rates for both plans by one
percentage point in each year would have resulted in no increase in the APBO at
year-end 1993 for the defined dollar plan and a $2.5 million increase for the
full coverage plan. The aggregate of the service cost and interest cost
components of the net postretirement health care benefit expense for 1993 would
have resulted in no increase for the defined dollar benefit plan and a $0.2
million increase for the full coverage plan.
Retirement Plans
_________________
The Company sponsors and contributes to a defined contribution retirement plan,
American Stores Retirement Estates ("ASRE"). This plan was authorized by the
Board of Directors for the purpose of providing retirement benefits for
associates of American Stores Company and its subsidiaries. The plan covers
employees meeting age and service eligibility requirements, except those
represented by a labor union, unless the collective bargaining agreement
provides for participation. Contributions to ASRE are made at the discretion
of the Board of Directors.
The Company also contributes to multi-employer defined benefit retirement plans
in accordance with the provisions of the various labor contracts that govern the
plans. The multi-employer plan contributions are generally based on the number
of hours worked. Information about these plans as to vested and non-vested
accumulated benefits and net assets available for benefits is not attainable.
Retirement plans expense in each year was as follows:
(In thousands of dollars) 1993 1992 1991
______________________________________________________________________________
Company sponsored plans $ 79,626 $ 75,118 $ 69,500
Multi-employer plans 62,859 65,126 66,135
________ ________ ________
$142,485 $140,244 $135,635
======== ======== ========
Effective December 31, 1984, the Board of Directors of the Company authorized
the termination of the Company sponsored defined benefit retirement plan,
American Stores Company Retirement Plan (the "Plan"). In 1986, the Company and
an affected employee filed a declaratory judgment action against the Plan and
American Stores Company Benefit Plans Committee in the U.S. District Court for
the District of Utah (Central Division). The Company sought a judicial
determination that the termination of the "Rule of 80" (sum of age and years of
service) early retirement feature of the Plan was proper and that qualifying
individuals would be entitled to participate in a "shortfall supplement
program."
In July 1992, the District Court ruled that "Rule of 80" benefits had been
terminated for those Plan participants whose age and service years equaled less
than 80 by the close of business on February 2, 1985, but that the "Rule of 80"
pension was not terminated with respect to those employees whose age and service
years equaled 80 or more by the close of business on February 2, 1985, and who
had not attained age 55 by such date. In the first quarter of 1993, as a result
of the ruling, the Company recognized $45.7 million of the $59 million
previously provided to the Plan as other income. The remaining $13.3 million
was required to be paid by the Plan to 139 Plan participants for "Rule of 80"
pension benefits. Based on the results of the litigation, a condition for
funding the "shortfall supplement" program was not met and the Company has
determined that no payments are to be made pursuant to such program.
Legal Proceedings
_________________
In addition to other litigation arising in the ordinary course of the Company's
business, two of its subsidiaries are defendants in the legal proceedings
described below.
Stender Litigation. The Northern Division of Lucky Stores, Inc. ("Lucky"), is
a defendant in a certified class action filed in 1988 in the U.S. District Court
for the Northern District of California on behalf of 20,000 female and 3,500
black potential claimants who have been or are employed in Lucky's grocery,
produce, delicatessen and general merchandise departments. The claimants
alleged, among other things, that Lucky's initial placement, promotion, movement
to full-time status, training, transfer and work hour assignment practices have
been discriminatory on the basis of sex and race, in violation of federal and
California law.
In August 1992, Lucky settled all issues applicable to the race claimants by
paying $350,000 and attorneys' fees to the race claimants and establishing
policies and procedures to address the race claimants' concerns. In October
1992, the judge and the class approved the settlement, which became a consent
decree and completely resolved the race claims.
In January 1994, the Company obtained a tentative court order approving
settlement of all issues applicable to the remaining claimants. These
settlement terms provide for the payment of cash damages of up to $60.5 million
payable on or after January 1, 1995, and attorneys' fees and costs in the amount
of $13.8 million payable within 30 days of the final order. The Company
received payment from insurance carriers in the amount of $31.6 million and the
remaining $42.7 million amount payable has been fully reserved. The settlement
also provides for contingent damages of up to $13 million if the Company does
not meet certain goals over a seven year period and requires the Company to
commit to employ certain prescribed practices to implement the settlement. The
Company satisfied the goals for 1992-93, has already exceeded the goals for
1993-94, and believes the likelihood of a failure to meet the defined goals is
remote. Accordingly, the Company has not established reserves for this
contingency. The Company expects that the terms of the settlement will be
approved at a Fairness Hearing to be held April 24, 1994.
Salmonella Litigation. Jewel Companies, Inc. remains subject to a certified
class action in connection with the production and sale by Jewel in March and
April 1985 of milk that contained Salmonella typhimurium. Jewel entered into
a settlement agreement with class counsel in which Jewel acknowledged liability
for compensatory damages to proper class claimants and established a claims
facility to process class claims. As of year-end 1993, there remained
approximately 45 of the original 16,000 class claimants. The preparation of
offers to, and/or negotiations with, the remaining claimants is proceeding.
Additionally, Jewel continues to be a defendant in approximately 8 lawsuits
involving approximately 19 persons who opted out of the class. Some of these
remaining suits involve allegations of wrongful death, serious injury or
permanent disability.
Costs of settlement and defense expenses associated with the Salmonella claims
and lawsuits exceeded the amount of available insurance coverage and, in the
fourth quarter of 1991, the Company increased its reserves with a $19.6 million
pre-tax charge to earnings. The Company believes that the total reserves for
this litigation should be sufficient to resolve the remaining compensatory
claims and expenses stemming from the 1985 outbreak.
Contingencies
_____________
The Company, from time to time, has disposed of leased properties and may retain
certain contingent lease liabilities, either by contract or law. Although the
Company is unaware of any material assertions against it from such dispositions,
such claims may arise in the future. If such claims were asserted, the expense
to the Company would consist of unpaid lease obligations, such as rents, which
may be offset by subletting the property, negotiating favorable lease
terminations, operating the facilities or applying existing reserves.
The Company has identified environmental contamination sites related primarily
to underground petroleum storage tanks at various store, warehouse, office and
manufacturing facilities (related to current operations as well as previously
disposed of businesses). At most such locations, remediation is either underway
or completed. One of the Company's subsidiaries, Acme Markets, Inc., has been
identified by the Environmental Protection Agency as a potentially responsible
party (PRP) for the costs of cleaning up a hazardous waste disposal site in New
Jersey pursuant to the Comprehensive Environmental Response Compensation and
Liabilities Act of 1980 (CERCLA) and other environmental laws. Numerous other
parties have also been identified as PRPs at the site. Although liability under
CERCLA may be joint and several and the Company cannot yet determine the total
liability of all PRPs, the Company believes that its potential exposure is
limited because Acme was a de minimis contributor to the site and the other PRPs
include many other large, solvent public companies. Two of the Company's other
subsidiaries, Jewel Food Stores, Inc. and Jewel Osco Southwest, Inc. have been
identified by the Montana Department of Health and Environmental Services as two
of five PRPs for the costs related to the release of hazardous wastes at a
Montana site. Jewel and Jewel Osco Southwest have been ordered to investigate
and monitor the contamination at the site, along with one other PRP. The
Company does not believe that the costs for investigation and remediation will
be material; Jewel has also filed suit against other PRPs for contribution to
the costs it has incurred and may incur in the future. Charges against earnings
for environmental remediation were not material in 1993, 1992 and 1991.
Reserves have been established for each environmental contamination site unless
an unfavorable outcome is remote. Although the ultimate outcome and expense of
environmental remediation is uncertain, the Company believes that required
remediation and continuing compliance with environmental laws in excess of
current reserves will not have a material adverse effect on the financial
position or results of operations of the Company.
<PAGE>
<TABLE>
Quarterly Results (unaudited)
_____________________________
In the opinion of management, all adjustments necessary for a fair presentation have been included:
First Second Third Fourth Fiscal
(In thousands, except per share data)(1) Quarter Quarter Quarter Quarter(2) Year
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
1993
Sales $4,668,105 $4,693,057 $4,531,715 $4,870,562 $18,763,439
Gross profit 1,201,785 1,224,186 1,195,398 1,326,463 4,947,832
Operating profit 118,108 153,695 136,994 233,085 641,882
Gains (losses) on asset sales, other 31,665 (2,544) 699 (5,692) 24,128
Earnings before extraordinary item 56,507 58,501 45,408 101,674 262,090
Extraordinary item -- early retirement of
debt - net of taxes (15,000) (15,000)
Net earnings 41,507 58,501 45,408 101,674 247,090
Earnings per share before
extraordinary item $.40 $.41 $.32 $.72 $1.85
Extraordinary item (.11) (.11)
Net earnings per share(3) .29 .41 .32 .72 1.74
Fully diluted earnings per share .69
1992 (4)
Sales $4,924,074 $4,702,547 $4,574,284 $4,850,275 $19,051,180
Gross profit 1,230,335 1,226,293 1,203,575 1,315,190 4,975,393
Operating profit 120,337 150,108 132,593 220,276 623,314
Gains (losses) on asset sales, other (28,381) (3,633) (2,016) (1,086) (35,116)
Net earnings 18,268 51,231 43,222 94,745 207,466
Net earnings per share(3) $.13 $.37 $.31 $.67 $1.48
Fully diluted earnings per share .64
1991 (4)
Sales $5,411,583 $5,255,370 $4,939,397 $5,216,606 $20,822,956
Gross profit 1,328,632 1,306,188 1,229,084 1,343,318 5,207,222
Operating profit 141,679 154,428 120,171 185,710 601,988
Gains (losses) on asset sales, other (1,790) 114,352 (3,639) (10,206) 98,717
Earnings before cumulative effect of a
change in accounting principle 35,959 116,313 28,895 58,849 240,016
Cumulative effect of a change in accounting
principle--
Postretirement health care benefits (40,734) (40,734)
Net earnings (4,775) 116,313 28,895 58,849 199,282
Earnings per share before cumulative
effect of a change in accounting principle $.26 $.84 $.21 $.42 $1.73
Cumulative effect of a change in accounting
principle (.29) (.29)
Net earnings per share (3) (.03) .84 .21 .42 1.44
(1) Restated as necessary to reflect the March 1994 and July 1991 two-for-one stock splits.
(2) Operating profit in the fourth quarter has exceeded the prior three quarters in each of the three
years presented due to the seasonality of the food and drug retail business. The holiday season
occurring in the fourth quarter benefits the food and drug retail business. There is also typically
an increase in cold and flu occurrences during this quarter which benefits the drug store
operations.
(3) The effect of the assumed conversion of all convertible securities and stock options into common
stock would result in dilution of less than 3% unless otherwise set forth herein.
(4) Restated to reflect adoption of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," as if effective at the beginning of fiscal 1989.
</TABLE>
<TABLE> Exhibit 22
AMERICAN STORES COMPANY
PRINCIPAL SUBSIDIARIES,
YEAR END 1993
State of
Subsidiary Incorporation
__________ _____________
<S> <C>
Jewel Companies, Inc. DE
Acme Markets, Inc. PA
Jewel Food Stores, Inc. NY
Star Market Co. Division of Jewel Food Stores, Inc.
American Drug Stores, Inc., dba IL
Osco Drug
Sav-on
American Food and Drug, Inc. DE
Jewel Osco Southwest, Inc. IL
Lucky Stores, Inc. DE
American Stores Properties, Inc. DE
American Stores Realty Corp. PA
Skaggs Telecommunications Service, Inc. UT
</TABLE>
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Form 10-K of
American Stores Company and subsidiaries of our report dated
March 21, 1994, included in the American Stores Company 1993
Annual Report to Shareholders.
Our audits also included the consolidated financial statement
schedules of American Stores Company and subsidiaries listed in
Item 14(a). These schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the
Registration Statements (Forms S-8 No. 2-71032, No. 2-54101, No.
33-25613, No. 2-94235, No. 33-48203, No. 33-48204, No. 33-08801,
No. 33-32150, No. 2-51401 and S-3 Nos. 33-41640, 33-41641 and 33-
52331) of our report dated March 21, 1994, with respect to the
consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph
with respect to the financial statement schedules included in
this Form 10-K of American Stores Company.
ERNST & YOUNG
Salt Lake City, Utah
April 25, 1994
Exhibit 28
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___ to ___
Commission File Number 1-5392
A. Full title of the Plan and the address of the Plan, if different from
that of the issuer named below:
AMERICAN STORES RETIREMENT ESTATES
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
AMERICAN STORES COMPANY
709 East South Temple
Salt Lake City, UT 84102
<PAGE>
The following financial statements and schedules of American Stores
Retirement Estates are submitted herewith:
INDEX
Page
----
Report of Independent Auditors F-3
Statements of Financial Position -
December 31, 1993 and 1992 F-4
Statements of Operations and Changes in Plan Equity -
Years ended December 31, 1993, 1992 and 1991 F-5
Notes to Financial Statements F-6 to F-11
Schedule II - Allocation of Plan Assets and Liabilities
to Investment Fund Options - December 31, 1993
and 1992 F-12
Schedule III (Paper Filed Under Form SE) - Allocation of
Plan Income and Changes in
Plan Equity to Investment Fund Options -
Years ended December 31, 1993, 1992 and 1991 F-13
Consent of Independent Auditors F-14
The written consent of independent auditors required to be filed as an
exhibit to this report is included on Page F-14 of the financial statements
SIGNATURES
----------
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the members of the American Stores Company Benefit Plans Committee have
duly caused this annual report to be signed by the undersigned hereunto duly
authorized.
AMERICAN STORES RETIREMENT ESTATES
By /s/Scott Bergeson
_________________________________
Scott Bergeson, Chairman
American Stores Company
Benefit Plans Committee
Dated: April 25, 1994
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
American Stores Company
Benefit Plans Committee
American Stores Retirement Estates
Salt Lake City, Utah
We have audited the accompanying statements of financial position of American
Stores Retirement Estates as of December 31, 1993 and 1992, and the related
statements of operations and changes in plan equity for each of the three years
in the period ended December 31, 1993. Our audits also included the financial
statement schedules listed in the Index at F-2. These financial statements and
schedules are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements and schedules 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, the financial statements referred to above present fairly, in
all material respects, the financial position of American Stores Retirement
Estates at December 31, 1993 and 1992, and the results of its operations and
changes in plan equity for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects, the information set forth therein.
ERNST & YOUNG
Salt Lake City, Utah
April 25, 1994
F-3
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
STATEMENTS OF FINANCIAL POSITION
December 31
1993 1992
-------------- --------------
ASSETS
Investments
American Stores Company Common Stock Fund $ 133,522,501 $ 138,622,959
Fixed Income Fund 254,079,550 223,722,347
Regular Fund 927,918,549 775,015,475
Safety Fund 59,196,478 60,081,582
All Equity Fund 84,749,596 62,167,028
-------------- --------------
$1,459,466,674 $1,259,609,391
Receivable from American Stores Company 78,000,000 74,000,000
Receivable for net participant activity 976,619 1,808,934
Interest and dividends receivable 624,073 629,757
Loans to participants 72,737,759 36,027,397
Other - 55,221
-------------- --------------
$1,611,805,125 $1,372,130,700
============== ==============
LIABILITIES AND PLAN EQUITY
Plan equity $1,611,805,125 $1,372,130,700
-------------- --------------
$1,611,805,125 $1,372,130,700
============== ==============
See notes to Financial Statements.
F-4
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
STATEMENTS OF OPERATIONS AND CHANGES IN PLAN EQUITY
Year Ended December 31
1993 1992 1991
------------- ------------- ------------
Additions:
Contributions:
Participants $ 78,489,529 $ 77,378,469 $ 76,707,939
American Stores Company 78,000,000 74,000,000 71,000,000
Forfeitures 2,360,609 2,652,084 2,778,657
------------- ------------- ------------
158,850,138 154,030,553 150,486,596
Investment income:
Cash dividends:
American Stores Company
Common Stock Fund 2,567,451 2,318,339 2,048,014
Fixed Income Fund 1,471,351 556,807 444,314
Regular Fund 22,148,579 16,481,539 13,898,258
All Equity Fund 3,126,885 1,990,723 1,388,345
Interest:
American Stores Company
Common Stock Fund 310,955 270,047 454,898
Fixed Income Fund 16,154,787 15,578,106 15,253,094
Regular Fund 25,579,786 24,174,311 21,877,602
Safety Fund 2,960,100 3,234,527 3,947,852
All Equity Fund 425,245 237,929 347,757
Net realized gains (losses):
American Stores Company
Common Stock Fund 1,824,967 3,694,790 6,828,049
Fixed Income Fund 7,184,168 8,701,123 6,826,471
Regular Fund 53,559,600 42,377,970 39,875,705
Safety Fund (157,321) 224,334 (11,897)
All Equity Fund 5,276,769 1,794,777 128,033
Transfers from (to) other plans 9,095,153 (276,005) 1,609,258
Exchanges from other funds 95,857,477 28,675,146 43,100,643
-------------- ------------- ------------
406,236,090 304,065,016 308,502,992
Deductions:
Withdrawals 107,241,309 99,534,567 83,400,130
Investment manager fees 3,611,117 3,757,087 2,295,397
Custodial fees 895,846 202,116
Administrative fees 1,698,217 346,611
Exchanges to other funds 95,857,477 28,675,146 43,100,643
-------------- ------------- ------------
209,303,966 132,515,527 128,796,170
Net unrealized appreciation
(depreciation) of
investments - Note C 42,742,301 (9,925,711) 99,050,525
-------------- ------------- ------------
NET ADDITIONS 239,674,425 161,623,778 278,757,347
Plan equity at beginning of year 1,372,130,700 1,210,506,922 931,749,575
-------------- -------------- ------------
PLAN EQUITY AT END OF YEAR $1,611,805,125 $1,372,130,700 $1,210,506,922
============== ============== ==============
See notes to Financial Statements.
F-5
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments: Investments are stated at current value. American Stores Company
Common Stock, which is traded on national securities exchanges, and other equity
securities are valued at the last reported sales price on the last business day
of the Plan year. All government and corporate debentures are valued at the
last reported sales price on the last business day of the Plan year on a
national security exchange plus any accrued interest. If there are no such
sales nor listing on a national security exchange, alternative sources are used.
Withdrawals and Exchanges: Withdrawals and exchanges between investment fund
options by participants are recorded based upon the specific proceeds and cost
of the investment at the date of withdrawal or exchange.
Realized Gain (Loss): The realized gain (loss) on investments is the difference
between the proceeds received and the average cost of specific investments sold.
Unrealized Appreciation (Depreciation): Unrealized appreciation (depreciation)
for the year is the difference between the current values at the beginning and
the end of the year.
NOTE B - DESCRIPTION OF PLAN
American Stores Retirement Estates (the Plan) was authorized by the Board of
Directors of American Stores Company and was effective January 1, 1985 for the
benefit of certain employees of American Stores Company and its subsidiaries
(the Company). The Plan is a defined contribution profit sharing plan
maintained primarily for the purpose of providing retirement income for
participants and is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
F-6
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE B - DESCRIPTION OF PLAN (CONTINUED)
Employees become eligible to participate in the Plan upon completion of two
years of service or, if the employee is 21 years of age or older, upon the
completion of one year of service. Employees represented by labor organizations
are not eligible to participate in the Plan unless the Company and the labor
organization specifically agree to the contrary.
Plan participants may make personal deposits to the Plan on either or both a tax
deferred and an after-tax basis. Company contributions to the Plan are set each
year at the discretion of the Company's Board of Directors for the prior Plan
year and are irrevocable. The Company contributions and forfeitures are first
used to restore the previously forfeited accounts of rehired participants
pursuant to Plan provisions. The remainder of such contributions and
forfeitures are then allocated to Plan participants, as described below: one
quarter is allocated among participants who made personal deposits to the Plan,
pro rata, based upon the amounts of their deposits of up to 6% of compensation.
Three quarters are allocated among participants as follows: (i) each
participant who has received compensation in excess of the Social Security wage
base for the year is allocated an amount equal to such excess times the maximum
amount allowable under Code Section 401(1); and (ii) any amount remaining is
allocated among all participants in proportion to the total compensation of each
for the year. Allocations to collective bargaining unit employees are offset
by obligations of the Company to contribute to a collective bargaining unit
plan. A participant's 1993 compensation in excess of $235,840 (adjusted each
year by the Internal Revenue Service) is excluded in determining the amount of
Company Contributions and forfeitures allocated to the participant.
Company contributions made on behalf of participants that are not based upon
deposits made by such participants vest on a graduated schedule. For all
participants who perform at least one hour of service in any year beginning on
or after January 1, 1989, the schedule commences with 30% at three years of
service and increases annually to full vesting at seven years of service (the
7-Year Vesting Schedule). Personal deposits of participants and Company
contribution allocations based upon personal deposits of participants fully vest
immediately.
F-7
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE B - DESCRIPTION OF PLAN (CONTINUED)
The Plan presently maintains five investment fund options in which participants
may invest. The investment fund options are as follows: (i) Company Stock Fund
- - - consisting solely of American Stores Company Common Stock. This fund provides
a high degree of risk because of the volatility generally associated with a
single stock investment; (ii) Fixed Income Fund - provides a low to moderate
level of risk because of the diversity of government and corporate securities
in the fund that pay interest. This fund contains both domestic and
international investments; (iii) Regular Fund - provides moderate risk because
of the balance between stocks and fixed income investments. The fund is
diversified across industry sectors and types of fixed income securities and
contains both domestic and international investments; (iv) Safety Fund -
provides a very low level of risk because of the high-quality, short-maturity
fixed income investments included in the fund; (v) All Equity Fund - provides
a moderate to high level of risk. The All Equity Fund is diversified across
industry sectors and contains both domestic and international equity
investments.
Participants may apportion their deposits between more than one investment fund
option and can change their current deposit investment mix as often as desired.
Existing participant account balances can be exchanged between investment fund
options every 30 days.
Each participant's share of the Company contribution and forfeitures is
automatically invested according to their current deposit investment mix.
Participants not making personal deposits may specify an investment option for
the Company contribution. If a specification is not made, the Company
contribution will be invested in the Fixed Income Fund.
Investment manager fees, trustee fees and all outside administrative costs are
paid by the Plan and are usual and customary.
The number of employees in each investment fund option (an employee can invest
in more than one fund option) at December 31, 1993 was:
Investment Fund Option Employees
---------------------- ---------
American Stores Company Common Stock Fund 9,984
Fixed Income Fund 22,335
Regular Fund 34,651
Safety Fund 1,552
All Equity Fund 8,590
F-8
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE B - DESCRIPTION OF PLAN (CONCLUDED)
Upon separation from service, withdrawals may be made at the election of the
participant, in a lump sum or in installments. Individuals who transferred
amounts to the Plan which are attributable to the former American Stores Company
Retirement Plan may receive their entire Plan account balance as a deferred
annuity. Active employees may withdraw after-tax personal deposits at any time,
but may only withdraw tax deferred personal deposits upon the occurrence of an
extreme financial hardship. Participants may also obtain loans from the Plan
within certain limits.
NOTE C - INVESTMENTS
The Plan's assets are held by Fidelity Management Trust Company, the Trustee of
the Plan, which executes all transactions therein under the direction of the
Benefit Plans Committee. The assets are held in a Master Trust, commingled with
assets of the Company's other benefit plans. The Company's benefit plans
participating in the Master Trust collectively own, through the Master Trust,
the assets based upon investment percentages. Participant transaction activity
is designated to specific plans. Accordingly, each plan's investment percentage
in the Master Trust changes regularly. Income earned by the Master Trust is
allocated to the various plans based upon the investment percentage on the day
the income is earned.
The investment percentages of each fund in the Master Trust at December 31, 1993
are:
1993 1992
---- ----
American Stores Company
Common Stock Fund 5% 6%
Fixed Income Fund 9% 9%
Regular Fund 33% 31%
Safety Fund 2% 2%
All Equity Fund 3% 3%
F-9
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE C - INVESTMENTS (CONCLUDED)
The total assets, liabilities and results of operations of the Master Trust
are as follows:
December 31
1993 1992
-------------- --------------
Assets $2,862,327,862 $2,562,029,533
Liabilities 75,116,932 49,891,640
-------------- --------------
Net Assets in Master Trust $2,787,210,930 $2,512,137,893
============== ==============
Change in Net Assets $ 275,073,037 $ 151,712,296
============== ==============
The cost of Plan investments at December 31, 1993 and 1992 was as follows:
Number of Shares Cost of Investments
-------------------- -------------------------------
1993 1992 1993 1992
--------- --------- -------------- --------------
American Stores Company
Common Stock Fund 6,154,212 6,253,318 $ 101,189,245 $ 103,811,250
Fixed Income Fund 248,464,198 222,083,941
Regular Fund 847,679,511 731,760,873
Safety Fund 59,382,439 59,924,163
All Equity Fund 73,718,513 55,738,697
-------------- --------------
$1,330,433,906 $1,173,318,924
============== ==============
On March 21, 1994 the Board of Directors of American Stores Company declared a
2-for-1 stock split on the company's common stock. Plan asset shares have been
restated to effect the stock split.
The net unrealized appreciation (depreciation) in the aggregate from cost to
market value of investments was as follows:
Net unrealized depreciation at December 31, 1990 $ (2,834,347)
Net 1991 unrealized appreciation 99,050,525
------------
Net unrealized appreciation at December 31, 1991 96,216,178
Net 1992 unrealized depreciation (9,925,711)
------------
Net unrealized appreciation at December 31, 1992 86,290,467
Net 1993 unrealized appreciation 42,742,301
------------
Net unrealized appreciation at December 31, 1993 $129,032,768
============
F-10
<PAGE>
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE D - ASSET TRANSFERS
During 1993, $13,286,668 was transferred to the Plan from the terminated
American Stores Company Retirement Plan. Of that amount, $4,191,515 was
immediately paid out to participants of the terminating plan who requested lump
sum distributions, resulting in a net transfer of $9,095,153.
During 1992, $299,373 was transferred to the Plan from the terminated Osco Drug,
Inc. Pension Plan for Bargaining Unit Employees.
During 1991, 51 Osco stores were sold to Pay Less Drugs and plan assets totaling
$23,821,050 for those participants continuing employment with Pay Less Drugs
were transferred to Pay Less Drugs. Those participants received $685,955 in
April, 1992, which represented their pro-rata share of the 1991 Company
Contribution.
Effective January 1, 1991, Lucky Stores Retirement Estates was merged into the
Plan. Total plan assets transferred were $50,858,510.
Buttrey Food and Drug was sold during 1990. Plan assets totaling $27,933,497
for those participants continuing employment with Buttrey Food and Drug were
transferred in 1991 to Buttrey Company Retirement Estates.
NOTE E - INCOME TAX STATUS
The Internal Revenue Service has ruled that the Plan and the Trust qualify under
Sections 401(a) and 401(k) of the Internal Revenue Code and are, therefore, not
subject to tax under present income tax laws. Participants are generally not
liable for income taxes on employer contributions or income credited to their
accounts until these amounts are distributed.
F-11
<TABLE>
AMERICAN STORES RETIREMENT ESTATES
SCHEDULE II - ALLOCATION OF PLAN ASSETS AND LIABILITIES TO INVESTMENT FUND OPTIONS
<CAPTION>
Receivable
from Receivable Interest
American for Net and ** Other
Investment Stores Participant Dividends Loans to Receivables
Fund Option Investments Company* Activity Receivable Participants (Payables) Plan Equity
- - --------------- ----------- ----------- ---------- -------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of
December 31, 1993
ASC Common
Stock Fund $ 133,522,501 $ 34,411 $624,073 $ 134,180,985
Fixed Income Fund 254,079,550 39,286 254,118,836
Regular Fund 927,918,549 551,461 928,470,010
Safety Fund 59,196,478 190,913 59,387,391
All Equity Fund 84,749,596 160,548 84,910,144
Company Contribution $78,000,000 78,000,000
Loans $72,737,759 72,737,759
-------------- ----------- ---------- -------- ----------- -------- ---------------
TOTAL $1,459,466,674 $78,000,000 $ 976,619 $624,073 $72,737,759 $ - $ 1,611,805,125
============== =========== ========== ======== =========== ========= ===============
As of
December 31, 1992
ASC Common
Stock Fund $ 138,622,959 $ 5,959,964 $ 347,913 $629,757 $ 6,077 $ 145,566,670
Fixed Income Fund 223,722,347 12,522,747 128,691 9,808 236,383,593
Regular Fund 775,015,475 46,323,028 1,117,901 33,977 822,490,381
Safety Fund 60,081,582 1,633,164 108,036 2,634 61,825,416
All Equity Fund 62,167,028 7,561,097 106,393 2,725 69,837,243
Loans $36,027,397 36,027,397
-------------- ----------- ---------- -------- ----------- ---------- --------------
TOTAL $1,259,609,391 $74,000,000 $1,808,934 $629,757 $36,027,397 $ 55,221 $1,372,130,700
============== ============ ========== ======== =========== ========== ==============
* Balances reclassified to reflect actual allocations for 1992.
** 1992 loans reclassified to conform to 1993 presentation.
</TABLE>
F-12
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-25613) pertaining to American Stores Retirement Estates of our report
dated April 25, 1994, with respect to the financial statements and schedules of
American Stores Retirement Estates included in this Annual Report (Form 11-K)
for the year ended December 31, 1993.
ERNST & YOUNG
Salt Lake City, Utah
April 25, 1994
F-14
<PAGE>
