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
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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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
The following financial statements of American Stores Retirement Estates
are submitted herewith:
INDEX
Report of Independent Auditors F-3
Statements of Net Assets Available for Benefits -
December 31, 1996 and 1995 F-4
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 1996 and 1995 F-5
Notes to Financial Statements F-6 to F-13
The written consent of independent auditors required to be filed as an
exhibit to this report is included on page
F-14.
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the members of the American Stores Benefit Plans Committee have duly
caused this annual report to be signed by the undersigned hereunto duly
authorized.
AMERICAN STORES RETIREMENT ESTATES
June 25, 1997 By /s/ Scott Bergeson
Scott Bergeson
Senior Vice President, Human
Resources and Chairman, Benefit
Plans Committee
REPORT OF INDEPENDENT AUDITORS
The Benefit Plans Committee
American Stores Retirement Estates
We have audited the accompanying statements of net assets available for benefits
of American Stores Retirement Estates as of December 31, 1996 and 1995, and the
related statements of changes in net assets available for benefits for the years
then ended. These financial statements are the responsibility of the Plan'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 net assets available for benefits of the Plan at
December 31, 1996 and 1995, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Salt Lake City, Utah
June 16, 1997
AMERICAN STORES RETIREMENT ESTATES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
(In thousands of dollars) 1996 1995
ASSETS
Value of Investment in the Master Trust
American Stores Company Common Stock Fund $ 302,206 $ 212,862
Fixed Income Fund 311,921 240,891
Regular Fund 2,368,931 1,104,943
Short Maturity Fund 145,537 73,490
All Equity Fund 256,583 153,780
Loans to Participants 120,725 94,657
3,505,903 1,880,623
Value of Investment In Mutual Funds 121,248 0
Total Value of Investments 3,627,151 1,880,623
Receivable from American Stores Company 82,000 78,000
Interest and dividends receivable 1,268 1,111
Net assets available for benefits $ 3,710,419 $ 1,959,734
See notes to financial statements
AMERICAN STORES RETIREMENT ESTATES
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31,
(In thousands of dollars) 1996 1995
Additions:
Contributions:
Participants $ 84,370 $ 82,852
American Stores Company 82,000 78,000
Forfeitures 1,549 1,901
167,919 162,753
Income from investment in master trust:
American Stores Company
Common Stock Fund 110,503 7,813
Fixed Income Fund 18,694 35,999
Regular Fund 286,731 222,643
Short Maturity Fund 5,357 5,092
All Equity Fund 37,223 31,055
458,508 302,602
Income from investment in mutual funds 1,814 0
Transfers from other plans 1,273,885 0
Exchanges from other funds 623,267 188,099
2,525,393 653,454
Deductions:
Withdrawals 150,017 113,601
Administrative fees 1,424 1,559
Transfer to other plans 0 4,109
Exchanges to other funds 623,267 188,099
774,708 307,368
Net additions 1,750,685 346,086
Net assets available for benefits at
beginning of year 1,959,734 1,613,648
Net assets available for benefits at
end of year $ 3,710,419 $ 1,959,734
See notes to financial statements
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Master Trust: The Investment in the Master Trust Fund is stated
at fair value. The majority of investment values are ascertained from national
security exchanges. American Stores Company Common Stock, which is traded on
national securities exchanges, and other equity securities, are valued within
the Master Trust Fund 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 within the Master Trust
Fund. If there are no such sales or listings on a national security exchange,
alternative sources are used. Loans to participants are stated at cost which
approximates fair value.
Investment in Mutual Funds: The investment in mutual funds represents the fair
value of the accumulated assets of 117 mutual fund options. The values of the
mutual funds are ascertained from independently published sources. The
investment amount in each fund and the total investment in mutual funds are less
than 5% of net assets available for benefits and have been aggregated in the
financial statements. The income from investment in mutual funds is also
aggregated and is not indicative of the results of any individual fund.
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.
Reclassification of Prior Year Information: Certain prior year information has
been reclassified to conform with current year presentation.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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).
Effective July 1, 1995, employees become eligible to participate in the Plan
upon 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 participation.
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
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE B - DESCRIPTION OF PLAN (CONTINUED)
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 compensation in excess of $150,000 (adjusted
periodically) is excluded in determining the amount of Company contribution 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.
The Plan presently maintains five custom investment fund options within the
Master Trust in which participants may invest. The custom 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 interest bearing government and corporate securities in the fund.
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 equity and fixed income securities and contains both domestic and
international investments; (iv) Short Maturity 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. On October 1, 1996, the
plan began offering a broad range of mutual funds. The mutual funds are managed
by a variety of fund managers. The investment objectives are stated by each
fund and vary from fund to fund. The investment objectives of each fund have
been communicated to each plan participant. As of December 31, 1996, the plan
offered 117 mutual fund options of which 116 had activity during the period when
the option to invest in mutual funds was available. The plan presently offers
132 mutual funds from 14 investment companies for participant investment.
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 once per day. Prior to October 1, 1996, balances could be exchanged
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 Short Maturity Fund (Fixed Income Fund
prior to October 1, 1996).
Usual and customary investment manager fees, trustee fees, and all outside
administrative costs are paid by the Plan.
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE B - DESCRIPTION OF PLAN (CONCLUDED)
The number of employees investing in each custom fund option and in mutual funds
in total (an employee can invest in more than one fund option) at December 31,
1996 was:
Investment Fund Option Employees
American Stores Company Common Stock Fund 15,641
Fixed Income Fund 33,261
Regular Fund 41,180
Short Maturity Fund 3,338
All Equity Fund 13,385
Mutual Funds 6,801
Upon separation from service, participants can elect to withdraw balances either
in a lump sum or in installments, or the balances can be left in the Plan.
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
All of 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 majority of the Plan's assets are held in a
Master Trust (97% as of December 31, 1996). The remaining assets are invested
in mutual funds.
The assets held in the Master Trust are commingled with assets of another
benefit plan. 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 plans based
upon the investment percentage on the day the income is earned.
ASRE's investment percentages of each fund in the Master Trust at December 31
are:
1996 1995
American Stores Company
Common Stock Fund 9% 7%
Fixed Income Fund 9% 8%
Regular Fund 68% 35%
Short Maturity Fund 4% 2%
All Equity Fund 7% 5%
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE C - INVESTMENTS (CONCLUDED)
The total assets, liabilities and results of operations of the Master Trust
are as follows:
December 31,
(In thousands of dollars) 1996 1995
Assets $ 3,511,617 $ 3,168,171
Liabilities $ 4,039 $ 2,578
Net Assets in Master Trust $ 3,507,578 $ 3,165,593
Change in Net Assets $ 341,948 $ 507,001
The cost of investments for ASRE at December 31, 1996 and 1995 are as follows:
Number of Shares
(In thousands) Cost of Investments
(In thousands of dollars) 1996 1995 1996 1995
American Stores Company
Common Stock Fund 7,452 7,865 $ 191,394 $ 178,675
Fixed Income Fund 259,005 197,428
Regular Fund 1,861,339 801,630
Short Maturity Fund 128,783 66,689
All Equity Fund 188,666 111,632
Mutual Funds 123,112 0
Total $ 2,752,299 $ 1,356,054
The net unrealized appreciation (depreciation) for ASRE in the aggregate from
cost to fair value of investments are as follows:
( In thousands of dollars)
Net unrealized appreciation at December 31, 1994 $ 62,659
Net 1995 unrealized appreciation 365,770
Net unrealized appreciation at December 31, 1995 428,429
Net 1996 unrealized appreciation 330,030
Net unrealized appreciation at December 31, 1996 $ 758,459
Unrealized appreciation (depreciation) for the year is the difference between
the fair values at the beginning and the end of the year.
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE D - ASSET TRANSFERS
The Star Market division was sold during 1994. Plan assets totaling $71,188,468
for those participants continuing employment with Star Market were transferred
to Star Market Retirement Estates (SMRE) in 1994. The 1994 Company contribution
attributable to those participants totaling $4,109,027 was transferred to SMRE
in 1995, shortly following payment of the contribution in March 1995. SMRE is
not administered by or affiliated with American Stores Company.
American Stores Company was plan sponsor for JCRE (Jewel Companies Retirement
Estates), a frozen retirement plan which was maintained for members of JCRE who
had balances in the plan when American Stores Company merged with Jewel
Companies, Inc. in 1984. ASRE was established January 1, 1985 and since that
time no employee or employer contributions were made to JCRE for plan years
subsequent to 1984. Of the approximately 14,300 JCRE participants, over 12,000
also had ASRE accounts. In May and June of 1996, members of JCRE were balloted
to determine their desire to merge JCRE with ASRE. The voting effort was
completed June 15, 1996 with a large majority of JCRE members voting in favor of
the merger. Based on that outcome, JCRE was merged with ASRE effective July 31,
1996. Assets of $1,263,389,169 were transferred to ASRE on that date. Plan
features did not change as a result of the merger.
NOTE E - FINANCIAL INSTRUMENTS
Certain Plan investment managers invest in derivative foreign exchange forward
contracts for purposes of hedging or moderating the currency risks associated
with holding investments denominated in foreign currencies. Foreign exchange
forward contracts represent agreements to exchange the currency of one country
for the currency of another country at an agreed-upon price, on an agreed-upon
settlement date. Contracts are generally taken for periods ranging from 30 to
90 days, then renewed, generally, if the Plan continues to hold the underlying
foreign investment. Each investment manager's usage of such derivative
financial instruments is limited by the Plan's contractual investment
guidelines which prohibit the speculative or leveraged use of derivatives.
Foreign exchange forward contracts are stated at fair value, under the heading
of `Value of Investments in the Master Trust' in the Statements of Net Assets
Available for Benefits, which represents the amounts that the Plan would be
required to pay, at December 31, 1996, to cancel the contracts or transfer
them to other parties.
The notional or contract amounts of foreign exchange forward contracts are not
recorded as assets or liabilities on the Statements of Net Assets Available
for Benefits and do not represent the potential gain or loss associated with
such transactions.
At December 31, 1996, the Plan had the following open foreign exchange forward
contracts:
FORWARD CONTRACTS TO SELL FOREIGN CURRENCIES AND BUY U.S. DOLLARS
(In thousands of dollars)
Notional Amount Fair Value
Fixed Income Fund $ 60,556 $ 7
Regular Fund 197,046 596
All Equity Fund 8,033 265
Total $ 265,635 $ 868
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE E - FINANCIAL INSTRUMENTS (CONCLUDED)
FORWARD CONTRACTS TO BUY FOREIGN CURRENCIES AND SELL U.S. DOLLARS
(In thousands of dollars)
Notional Amount Fair Value
Fixed Income Fund $ 47,621 $ (215)
Regular Fund 141,240 (697)
All Equity Fund 1,016 (28)
Total $ 189,877 $ (940)
Credit risk represents the Plan's potential loss on foreign exchange forward
contracts if all counterparties to such contracts fail to perform according to
the terms of the contract. Credit risk is calculated using year-end currency
exchange rates. Historically, there have not been any losses associated with
counterparty non-performance on foreign exchange forward contracts. Exposure
to loss on these contracts will increase or decrease over the lives of the
contracts as currency exchange rates fluctuate.
At December 31, 1996, credit risk related to these contracts was as follows:
(In thousands of dollars)
Fixed Income Fund $ 814
Regular Fund 2,985
All Equity Fund 263
Total $ 4,062
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE F - ALLOCATION OF PLAN ASSETS TO INVESTMENT FUND OPTIONS
<TABLE>
(In thousands of dollars) RECEIVABLE
FROM INTEREST
AMERICAN AND
INVESTMENT STORES DIVIDENDS NET ASSETS AVAILABLE
FUND OPTION INVESTMENTS COMPANY* RECEIVABLE FOR PLAN BENEFITS
<S> <C> <C> <C> <C>
As of December 31, 1996
ASC Common
Stock Fund $ 302,206 $ 1,268 $ 303,474
Fixed Income Fund 311,921 311,921
Regular Fund 2,368,931 2,368,931
Short Maturity Fund 145,537 145,537
All Equity Fund 256,583 256,583
Loans to Participants 120,725 120,725
Mutual Funds 121,248 121,248
Company Contribution 82,000 82,000
TOTAL $ 3,627,151 $ 82,000 $ 1,268 $3,710,419
As of December 31, 1995
ASC Common
Stock Fund $ 212,862 $ 7,697 $ 1,111 $ 221,670
Fixed Income Fund 240,891 13,189 254,080
Regular Fund 1,104,943 44,742 1,149,685
Short Maturity Fund 73,490 1,322 74,812
All Equity Fund 153,780 11,050 164,830
Loans to Participants 94,657 94,657
TOTAL $ 1,880,623 $ 78,000 $ 1,111 $ 1,959,734
</TABLE>
* Balances reclassified to reflect actual allocations for 1995.
AMERICAN STORES RETIREMENT ESTATES
NOTES TO FINANCIAL STATEMENTS
NOTE G - ALLOCATION OF PLAN INCOME AND CHANGES IN PLAN ASSETS TO INVESTMENT
FUND OPTIONS
<TABLE>
(In thousands of dollars)
Income from
Year Ended Participant Company Investment in Transfers Withdrawls Exhange of Admin- Net
December 31, 1996 Contri- Contri- Master Trust (to) from less For- Participants Holdings istrative Additions
butions butions* & Mutaul Funds Other Plans feitures Additions Deductions Fees (Deductions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASC Common
Stock Fund $ 9,385 $ 110,503 $ (72)$ (14,992) $ 136,912$ (156,761)$ (232)$ 84,743
Fixed Income Fund 9,988 18,694 77,327 (19,598) 30,795 (57,181) (184) 59,841
Regular Fund 48,487 286,731 1,081,029 (88,344) 105,800 (202,029) (792) 1,230,882
Short Maturity Fund 1,672 5,357 61,621 (11,793) 96,862 (82,754) (38) 70,927
All Equity Fund 14,044 37,223 42,341 (9,549) 93,893 (84,334) (173) 93,445
Mutual Funds 794 1,814 (230) 159,005 (40,208) (5) 121,170
Company Contribution $ 82,000 82,000
Loan Defaults 11,639 (3,962) 7,677
Total $ 84,370 $ 82,000 $ 460,322 $ 1,273,885 $(148,468) $ 623,267$ (623,267)$ (1,424)$1,750,685
Year Ended
December 31, 1995
ASC Common
Stock Fund $ 9,364 $ 7,697 $ 7,813 $ (196)$ (10,652)$ 61,621$ (55,528)$ (212)$ 19,907
Fixed Income Fund 9,762 13,189 35,999 (827) (17,471) 19,077 (26,829) (221) 32,679
Regular Fund 50,356 44,742 222,643 (2,639) (55,907) 50,207 (57,805) (936) 250,661
Short Maturity Fund 2,056 1,322 5,092 4 (8,153) 31,856 (30,879) (74) 1,224
All Equity Fund 11,314 11,050 31,055 (451) (6,330) 25,338 (17,058) (116) 54,802
Loan Defaults (13,187) (13,187)
Total $ 82,852 $ 78,000 $ 302,602 $ (4,109)$ (111,700)$ 188,099$ (188,099)$ (1,559)$ 346,086
</TABLE>
* Balances reclassified to reflect actual allocations for 1995.
NOTE H - INCOME TAX STATUS
The Internal Revenue Service ruled on May 9, 1995 that the Plan qualifies
under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the
underlying trust is not subject to tax under IRC Section 501(a). Once
qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Plan Administrator is not aware of any
course of action or series of events that have occurred that might adversely
affect the Plan's qualified status.
NOTE I - TRANSACTIONS WITH PARTIES-IN-INTEREST
During 1996 and 1995, the ASC Stock Fund received $4,597,006 and $4,220,902,
respectively, in common stock dividends from American Stores Company.
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 June 16, 1997, with respect to the financial statements of
American Stores Retirement Estates included in this Annual Report (Form 11-K)
for the year ended December 31, 1996.
ERNST & YOUNG LLP
Salt Lake City, Utah
June 25, 1997
