SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1999
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.)
299 South Main Street
Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip Code)
801-539-0112
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes____ No____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 26, 1999: Common Stock, Par Value $1.00 - 277,027,615
shares.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
AMERICAN STORES COMPANY
Consolidated Condensed Statements of Earnings
(unaudited)
(In thousands, except per share data)
<TABLE>
Thirteen Weeks Ended
--------------------
<S> <C> <C>
May 1, May 2,
1999 1998
---------- ----------
Sales $5,047,723 $4,872,686
Cost of merchandise sold, including
warehousing and transportation expenses (3,706,679) (3,606,144)
---------- ----------
Gross profit 1,341,044 1,266,542
Operating and administrative expenses (1,142,614) (1,092,027)
Merger related stock option income 28,864
---------- ----------
Operating profit 227,294 174,515
Other (expense) income:
Interest income 2,432 964
Interest expense (55,220) (60,132)
---------- ----------
Net other (expense) income (52,788) (59,168)
---------- ----------
Earnings before income taxes 174,506 115,347
Federal and state income taxes (73,086) (49,486)
---------- ----------
Net earnings $ 101,420 $ 65,861
========== ==========
Basic earnings per share $ 0.37 $ 0.24
========== ==========
Diluted earnings per share $ 0.36 $ 0.24
========== ==========
Average number of common shares outstanding
used for basic earnings per share 276,997 273,942
Dilutive common stock options 3,103 1,658
---------- ----------
Average number of common shares outstanding
used for dilutive earnings per share 280,100 275,600
Dividends per share $0.09 $0.09
- --------------------------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
AMERICAN STORES COMPANY
Consolidated Condensed Balance Sheets
(unaudited)
(In thousands)
<TABLE>
<S> <C> <C>
May 1, January 30,
1999 1999
---------- ----------
Assets
Current Assets:
Cash and cash equivalents $ 41,160 $ 35,493
Inventories 1,734,785 1,726,015
Other current assets 538,890 578,895
---------- ----------
Total current assets 2,314,835 2,340,403
Property, plant and equipment and property
under capital leases, less accumulated
depreciation and amortization of $2,771,375
on May 1, 1999 and $2,683,628 on
January 30, 1999 4,706,782 4,624,075
Goodwill 1,577,305 1,589,614
Other assets 331,857 331,207
---------- ----------
Assets $8,930,779 $8,885,299
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $1,119,584 $1,147,510
Other current liabilities 736,889 787,794
Current maturities of long-term debt and
capital lease obligations 51,730 49,651
---------- ----------
Total current liabilities 1,908,203 1,984,955
Other liabilities 740,241 778,119
Long-term debt and obligations under capital
leases, less current maturities 3,531,023 3,423,029
Shareholders' Equity - shares issued and
outstanding of 277,030 on May 1, 1999
and 276,676 on January 30, 1999 2,751,312 2,699,196
---------- ----------
Liabilities and Shareholders' Equity $8,930,779 $8,885,299
========== ==========
- -------------------------------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
AMERICAN STORES COMPANY
Consolidated Condensed Statements of Cash Flows
(unaudited)
(In thousands)
<TABLE>
Thirteen Weeks Ended
--------------------
<S> <C> <C>
May 1, May 2,
1999 1998
-------- --------
Cash Flows from Operating Activities:
Net earnings $101,420 $65,861
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 125,898 122,090
Merger related stock option income (28,864)
Net gain on asset sales (1,440) (474)
Changes in operating assets and liabilities (81,387) (142,790)
-------- --------
Total adjustments 14,207 (21,174)
-------- --------
Net cash provided by operating activities 115,627 44,687
-------- --------
Cash Flows from Investing Activities:
Expended for property, plant and equipment (199,304) (192,828)
Proceeds from sale of other assets 5,441 58,763
Increase in other assets (6,880) (9,117)
-------- --------
Net cash used in investing activities (200,743) (143,182)
-------- --------
Cash Flows from Financing Activities:
Issuance of new debt 145,000
Net increase (decrease)in borrowings 111,223 (44,985)
Other changes in equity 4,492 9,684
Cash dividends (24,932) (24,631)
-------- --------
Net cash provided by financing activities 90,783 85,068
-------- --------
Net increase (decrease) in cash and
cash equivalents 5,667 (13,427)
Cash and cash equivalents:
Beginning of year 35,493 47,794
-------- --------
End of quarter $ 41,160 $ 34,367
======== ========
Supplementary information - Statement of Cash Flows:
Cash paid during the year for:
Interest (net of amounts capitalized) $ 51,109 $ 69,056
Income taxes, net of refunds $ 23,133 $ 20,672
</TABLE>
<PAGE>
AMERICAN STORES COMPANY
Notes to Consolidated Condensed Financial Statements
(unaudited)
May 1, 1999
Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of American Stores Company and its
subsidiaries as of May 1, 1999 and January 30, 1999 and the results of its
operations and cash flows for the thirteen weeks ended May 1, 1999 and May 2,
1998. The operating results for the interim periods are not necessarily
indicative of results for a full year. For a further discussion of the Company's
accounting policies, please refer to the Company's Form 10-K for the fiscal year
ended January 30, 1999.
Merger Agreement
On August 2, 1998 the Company entered into an Agreement and Plan Of Merger (the
Merger Agreement) among the Company, Albertson's, Inc. (Albertson's) and Abacus
Holdings, Inc., a wholly-owned subsidiary of Albertson's (Merger Sub), pursuant
to which Merger Sub would be merged with and into the Company with the Company
surviving the merger as a wholly-owned subsidiary of Albertson's. Each share of
the Company's Common Stock would be converted into the right to receive 0.63
shares of Albertson's Common Stock, with cash paid in lieu of any fractional
shares. The transaction is intended to qualify as a pooling of interests for
accounting purposes and as a tax-free reorganization for U.S. federal income tax
purposes. On November 12, 1998, the stockholders of the Company and Albertson's
approved the Merger Agreement. The Company currently expects to complete the
merger by June 30, 1999, subject to certain conditions, including, among others,
regulatory approvals and other customary closing conditions.
In connection with the Merger Agreement, the Company and Albertson's entered
into reciprocal stock option agreements pursuant to which (a) the Company
granted Albertson's an option to purchase up to 54.5 million shares of Company
Common Stock (but in no event more than 19.9% of the outstanding shares of
Company Common Stock at the time of exercise) under certain circumstances and
upon the terms and conditions set forth in the stock option agreement, at an
exercise price of $30.24 per share and (b) Albertson's granted the Company an
option to purchase up to 48.8 million shares of Albertson's Common Stock (but in
no event more than 19.9% of the outstanding shares of Albertson's Common Stock
at the time of exercise) under certain circumstances and upon the terms and
conditions set forth in the stock option agreement at an exercise price of
$48.00 per share.
Stock options and certain shares of restricted stock granted under the Company's
stock option and stock award plans automatically vest upon a change of control,
which is defined in plans adopted prior to June 1997 (Pre-1997 Plans) as
stockholder approval of the Merger or, for options granted under the Company's
1997 Stock Option and Stock Award Plan and the 1997 Stock Plan for Non-Employee
Directors (1997 Plans), upon the later of stockholder approval or regulatory
approval of the Merger. All options outstanding on the consummation of the
merger will be converted into options to acquire shares of Albertson's Common
Stock. In addition, option holders have the right (limited stock appreciation
right or LSAR), during an exercise period of up to 60 days after the occurrence
of a change of control (but prior to consummation of the Merger), to elect to
surrender at consummation all or part of their options in exchange for shares
<PAGE>
Part I - Financial Information (continued)
Notes to Consolidated Condensed Financial Statements (continued)
of Albertson's Common Stock having a value equal to the excess of the change of
control price over the exercise price (which shares will be deliverable upon the
Merger). The change of control price is defined as the higher of (i) the highest
reported sales price during the 60-day period prior to the respective dates of
the "change of control", or (ii) the price paid to stockholders in the Merger,
subject to adjustment in both cases if the exercise period is less than 60 days.
Approval of the Merger Agreement on November 12, 1998 by the Company's
stockholders accelerated the vesting of 10.2 million stock options granted under
Pre-1997 Plans(approximately 60% of the outstanding stock options) and permitted
the holders of these options to exercise LSARs. The exercisability of 10.2
million LSARs resulted in the Company recognizing a $195.3 million merger
related stock option charge during the fourth fiscal quarter of 1998. This
charge was recorded based on the difference between the average option exercise
price of $19.15 and the average market price at the measurement dates of $38.29.
Of the 10.2 million options, 6.3 million were exercised using the LSAR feature,
1.7 million were exercised without using the LSAR, and 2.2 million shares
reverted back to fixed price options due to the expiration of the LSAR on
January 10, 1999.
In the first quarter of 1999 a market price adjustment of $28.9 million of
income was recorded to reflect a decline in the relevant stock price at the end
of the first fiscal quarter. The actual change of control price used to measure
the value of the 6.3 million LSARs will not be determinable until the date the
Merger is consummated or the Merger Agreement is terminated. Additional charges
or income will be recognized in each quarter until the Merger is consummated or
the Merger Agreement is terminated. If the Merger is consummated, the foregoing
net charges will be non-cash.
LSARs relating to the approximately 6.5 million remaining stock options issued
under the 1997 Plans will become exercisable upon regulatory approval of the
Merger, which would result in recognition of an additional charge estimated at
$85.3 million based on an average exercise price of $23.72 and assuming a change
of control price of $36.93. The actual change of control price used to measure
the value of the LSARs will not be determinable until the date the Merger is
consummated. If the Merger is consummated, the foregoing charges will be
non-cash.
Legal Proceedings
On September 13, 1996, a class action lawsuit captioned McCampbell et al. v.
Ralphs Grocery Company, et al. was filed in the San Diego Superior Court of the
State of California against the Company and two other grocery chains operating
in southern California. The complaint alleges, among other things, that the
Company and others conspired to fix the retail price of eggs in southern
California. The Company believes it has meritorious defenses to plaintiffs'
claims and plans to vigorously defend the lawsuit.
The Company is also involved in various other claims, administrative proceedings
and other legal proceedings which arise from time to time in connection with the
conduct of the Company's business. In the opinion of management, such
proceedings will not have a material adverse effect on the Company's financial
condition or results of operations.
<PAGE>
Part I - Financial Information (continued)
Notes to Consolidated Condensed Financial Statements (concluded)
Subsequent Event
On May 14, 1999 the Company terminated its $300 million LIBOR basket swap at a
cost of $.8 million. The five-year swap agreement had been entered into in 1997
and diversified the indices used to determine the interest rate on a portion of
the Company's variable rate debt by providing for payments based on foreign
LIBOR indices which were reset every three months. The fair value of the
agreement based on market quotes at year-end 1998 was a loss of $5.3 million.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Total sales increased to $5.0 billion in the first quarter of 1999 from $4.9
billion in the first quarter of 1998 for a total sales increase of 3.6%.
Comparable store sales (sales from stores that have been open at least one year,
including replacement stores) increased in the first quarter of 1999 by 2.4%.
The improvement in total and comparable sales in the first quarter of 1999 is
primarily due to the increase in net square footage since the prior year,
stronger pharmacy department sales and successful marketing and advertising
promotions. Retail square footage increased 2.3% over the last twelve months.
The increased pharmacy sales are the result of an increase in the number of
prescriptions filled due to new drug introductions and the continued growth in
managed care prescription plans in which the Company is a provider. Drug
inflation is also a significant component of the increase in pharmacy sales.
Pharmacy department comparable store sales in the first quarter of 1999
increased 20.2% over the prior year first quarter.
Gross profit as a percent of sales was 26.6% in the first quarter of 1999
compared to 26.0% in the prior year first quarter. Gross profit in 1999 improved
primarily due to improved procurement practices, less aggressive promotional
spending, favorable trends in product mix and lower warehouse and transportation
costs. Gross margins in the pharmacy department declined in the first quarter of
1999. However, pharmacy gross profit dollars increased over the prior year.
Pharmacy margin percentages continue to be pressured by the increased mix of new
branded drugs with lower margin rates and the continued growth of third-party
contracts. The LIFO charge to earnings amounted to $4.0 million in the first
quarter of 1999 and $5.0 million in the first quarter of 1998.
Operating and administrative expenses as a percent of sales were 22.6% and 22.4%
in the first quarter of 1999 and 1998, respectively. Operating and
administrative expense increased in the first quarter of 1999 primarily due to
higher rents and depreciation, resulting from the Company's three-year $3.0
billion capital expenditure program combined with higher employee benefit costs.
Stock options and certain shares of restricted stock granted under the Company's
stock option and stock award plans automatically vest upon a change of control,
which is defined in plans adopted prior to June 1997 (Pre-1997 Plans) as
stockholder approval of the Merger or, for options granted under the Company's
1997 Stock Option and Stock Award Plan and the 1997 Stock Plan for Non-Employee
Directors (1997 Plans), upon the later of stockholder approval or regulatory
approval of the Merger. All options outstanding on the consummation of the
merger will be converted into options to acquire shares of Albertson's Common
Stock. In addition, option holders have the right (limited stock appreciation
right or LSAR), during an exercise period of up to 60 days after the occurrence
of a change of control (but prior to consummation of the Merger), to elect to
surrender all or part of their options in exchange for shares of Albertson's
Common Stock having a value equal to the excess of the change of control price
over the exercise price (which shares will be deliverable upon the Merger). The
change of control price is defined as the higher of (i) the highest reported
sales price during the 60-day period prior to the respective dates of the
"change of control", or (ii) the price paid to stockholders in the merger,
subject to adjustment in both cases if the exercise period is less than 60 days.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Approval of the Merger Agreement on November 12, 1998 by the Company's
stockholders accelerated the vesting of 10.2 million stock options granted under
the Pre-1997 Plans (approximately 60% of the outstanding stock options) and
permitted the holders of these options to exercise LSARs. The exercisability of
10.2 million LSARs resulted in the Company recognizing a $195.3 million merger
related stock option charge during the fourth fiscal quarter of 1998. This
charge was recorded based on the difference between the average option exercise
price of $19.15 and the average market price at the measurement dates of $38.29.
Of the 10.2 million options, 6.3 million were exercised using the LSAR feature,
1.7 million were exercised without using the LSAR, and 2.2 million shares
reverted back to fixed price options due to the expiration of the LSAR on
January 10, 1999.
In the first quarter of 1999 a market price adjustment of $28.9 million of
income was recorded to reflect a decline in the relevant stock price at the end
of the first fiscal quarter. The actual change of control price used to measure
the value of the 6.3 million LSARs will not be determinable until the date the
Merger is consummated or the Merger Agreement is terminated. Additional charges
or income will be recognized in each quarter until the Merger is consummated or
the Merger Agreement is terminated. If the Merger is consummated, the foregoing
net charges will be non-cash.
LSARs relating to the approximately 6.5 million remaining stock options issued
under the 1997 Plans will become exercisable upon regulatory approval of the
Merger, which would result in recognition of an additional charge estimated at
$85.3 million based on an average exercise price of $23.72 and assuming a change
of control price of $36.93. The actual change of control price used to measure
the value of the LSARs will not be determinable until the date the Merger is
consummated. If the Merger is consummated, the foregoing charges will be
non-cash.
Operating profit increased 30.2% in the first quarter of 1999 compared to 1998.
Total operating profit was 4.5% of sales in 1999 and 3.6% of sales in 1998.
Operating profit excluding the unusual item (merger related stock option income)
increased 13.7% compared to 1998 and was 3.9% of sales in 1999.
Interest expense amounted to $55.2 million in the first quarter of 1999 compared
to $60.1 million in the first quarter of 1998. Interest expense decreased in
1999 due primarily to lower rates on variable rate debt.
The Company's effective income tax rates were 41.9% in 1999 and 42.9% in 1998.
The effective income tax rates for 1999 were lower due to the impact that the
higher earnings (including the merger related stock option income) in the
current year have on the fixed component of non-deductible goodwill.
The Company's basic earnings per share were $.37 and $.24 in the first quarter
of 1999 and 1998, respectively. Diluted earnings per share amounted to $.36 and
$.24 in the first quarter of 1999 and 1998, respectively. The merger related
stock option income in 1999 resulted in income of $.06 per diluted share.
Liquidity and Capital Resources
Cash provided by operating activities of $115.6 million in the first quarter of
1999 compares to $44.7 million in the same period of 1998. The increase is due
in part to cash flow benefits as a result of stronger net earnings and the
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
timing of estimated tax payments. The balance of the change is due to changes in
the other components of working capital and is not believed to be indicative of
long-term trends.
Cash capital expenditures in the first quarters of 1999 and 1998 amounted to
$199.3 million and $192.8 million, respectively. Total capital expenditures,
including the net present value of leases, amounted to $216.0 million in 1999,
compared to $233.8 million in 1998. For the first quarter of 1999, 15 stores
were opened or acquired, 10 stores were closed and 23 stores were remodeled.
Capital expenditures for fiscal 1999 are expected to be approximately $1.0
billion. The Company currently plans to open a total of approximately 80 new
stores and remodel approximately 88 stores in 1999.
The net increase in debt of $111.2 million in the first thirteen weeks of 1999
is compared to a net increase of $100.0 million in the same period of 1998.
The Company believes that its cash flow from operations, supplemented by its
revolving credit facilities, uncommitted credit facilities, other long-term
borrowings, availability under a universal shelf registration statement, as well
as its ability to refinance debt, will be adequate to meet its presently
identifiable cash requirements.
Year 2000
In 1996 the Company formed the Year 2000 Steering Committee to identify the
areas in which the Year 2000 issue could adversely affect the Company and
develop and implement a comprehensive program to avoid or minimize such effects.
The Committee consists of a member of senior management and representatives from
the information technology, legal and internal auditing departments. The
Committee reports directly to senior management and regularly advises the
Company's Board of Directors on its progress.
The Committee divided the universe of potential Year 2000 issues into two
categories, (i) internal exposure issues, consisting of potential problems with
the computer systems and equipment used and supported by the Company, and (ii)
external exposure issues, consisting of potential problems with the software and
hardware not supported by the Company's Information Technology Department, the
systems and equipment of third parties with whom the Company interfaces or on
whom the Company relies for the provision of critical products or services, and
equipment with embedded chips.
With respect to the internal exposure category, the Company identified potential
Year 2000 issues in each of the key areas of its business which utilize computer
software programs and operating systems. The Company and outside contractors
developed solutions for each component which was identified as "non-compliant"
and implemented the steps believed necessary to make such systems Year 2000
compliant. The Company has completed the implementation of substantially all the
new systems/fixes in the internal exposure category. The Company anticipates
that the implementation of the remaining systems/fixes will be completed by the
end of the second quarter of 1999, except fixes to a small number of legacy
systems the Company had originally planned to discontinue and the roll out of
in-store hardware and software that are targeted for completion during the third
quarter of 1999.
With respect to issues in the external exposure category, the Company is
continuing to follow-up with third parties that have not responded
satisfactorily or at all to the Company's initial mailing of Year 2000
questionnaires/certification forms. While the initial response rate to the
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Company's requests for information appeared favorable, there are still a
significant number of third parties that have not responded satisfactorily or at
all to the Company's requests. The Company's focus during the first two quarters
of 1999 will be to communicate with those third parties providing critical
products or services to the Company to determine the extent to which they are
addressing their own Year 2000 issues and to take additional actions based on
the information received.
Additionally the Company is attempting to identify all critical equipment with
embedded chips and is developing plans to test identified equipment for Year
2000 compatibility. These items include equipment not supported by the Company's
Information Technology Department such as heating units, alarm systems, vaults
and similar items that are widely used in the Company's operations. The Company
has attempted, when necessary, to contact the manufacturers of such equipment to
obtain their assistance in further testing, upgrading or repairing such items.
The Company estimates that its total cost to resolve internal exposure issues
will be approximately $25 million, substantially all of which has been spent to
date. The Company estimates that total direct costs to resolve external exposure
issues will be approximately $4.1 million, of which approximately $3.8 million
has been spent to date and approximately $.3 million will be spent during the
second quarter of 1999. All of the Year 2000 expenses are being funded through
operating cash flows.
The Company is dependent on the proper operation of its internal computer
systems and software for several key aspects of its business operations
including store operations, merchandise purchasing, inventory management,
pricing, sales, warehousing, transportation, financial reporting and
administrative functions. The Company is also dependent on the proper operation
of the computer systems and software of third parties providing critical goods
and services to the Company including vendors, utilities, financial
institutions, governmental entities and others. The failure or malfunction of
such internal or external systems, or of equipment containing embedded chips,
could impair the Company's ability to operate its business in the ordinary
course and could have a material adverse effect on its results of operations.
Management of the Company believes it has an effective program in place to
resolve internal Year 2000 issues in a timely manner and is continuing to take
steps to communicate with third parties with respect to their own Year 2000
issues. However, since it is not possible to anticipate all future outcomes,
especially when third parties are involved, there could be circumstances in
which the Company's operations would be disrupted and it would be unable to
service customers or maintain adequate inventory levels. The amount of lost
revenue and potential liability associated with claims related to the disruption
of the Company's business and its inability to deliver products cannot be
estimated at this time.
The Company has a contingency plan with respect to internal exposure issues and
plans to develop contingency plans with respect to external exposure issues and
equipment containing embedded chips. Contingency plans are expected to involve
manual work arounds, increased inventories of certain products or types of
products, and extra staffing.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (concluded)
Environmental
The Company has identified environmental contamination at certain of its store,
warehouse, office and manufacturing facilities (related to current operations as
well as previously disposed of businesses) which are primarily related to
underground petroleum storage tanks (USTs) and ground water contamination. The
Company conducts an on-going program for the inspection and evaluation of new
sites proposed to be acquired by the Company and the remediation/monitoring of
contamination at existing and previously owned sites. Although the ultimate
outcome and expense of environmental remediation is uncertain, the Company
believes that the required costs of remediation, UST upgrades and continuing
compliance with environmental laws will not have a material adverse effect on
the financial condition or operating results of the Company.
Cautionary Note
This report contains certain forward-looking statements about the future
performance of the Company and about its pending merger transaction which are
based on management's assumptions and beliefs in light of the information
currently available to it. The Company assumes no obligation to update the
information contained herein. These forward-looking statements are subject to
uncertainties and other factors that could cause actual results to differ
materially from such statements including, but not limited to: competitive
practices and pricing in the food and drug industry generally and particularly
in the Company's principal markets; the implementation of the Company's
re-engineering initiatives in accordance with the currently contemplated
schedule and budget; the Company's relationships with its employees and the
terms of future collective bargaining agreements; the costs and other effects of
legal and administrative cases and proceedings; the nature and extent of
continued consolidation in the food and drug industry; changes in the financial
markets which may affect the Company's cost of capital and the ability of the
Company to access the public debt and equity markets to refinance indebtedness
and fund the Company's capital expenditure program on satisfactory terms; supply
or quality control problems with the Company's vendors; changes in the rate of
inflation; changes in economic conditions which affect the buying patterns of
the Company's customers; the ability of the Company and its vendors, financial
institutions and others to resolve Year 2000 processing issues in a timely
manner; changes in state or federal legislation or regulation; diversion of
management's attention from other business concerns to the assimilation of the
merged operations as contemplated by the pending merger transaction;
uncertainties and difficulties relating to the integration of the merged
companies including the assimilation and retention of employees, challenges in
retaining customers and potential adverse short-term effects on operating
results; and delays or obstacles in obtaining required regulatory approvals
and/or other conditions necessary to satisfactorily close the pending merger
transaction.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
On May 14, 1999 the Company terminated its $300 million LIBOR basket swap at a
cost of $.8 million. The five-year swap agreement had been entered into in 1997
and diversified the indices used to determine the interest rate on a portion of
the Company's variable rate debt by providing for payments based on foreign
LIBOR indices which were reset every three months. The fair value of the
agreement based on market quotes at year-end 1998 was a loss of $5.3 million.
Please refer to Item 7A contained in the Company's Form 10-K for the fiscal year
ended January 30, 1999 for additional information.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings -- For a description of legal proceedings,
please refer to Item 3 "Legal Proceedings" contained in the
Company's Form 10-K for the fiscal year ended January 30, 1999.
The Company is involved in various claims, administrative
proceedings and other legal proceedings which arise from time to
time in connection with the conduct of the Company's business. In
the opinion of management, such proceedings will not have a
material adverse effect on the Company's financial condition or
results of operations.
Item 2. Changes in Securities -- None
Item 3. Defaults Upon Senior Securities -- None
Item 4. Submission of Matters to a Vote of Security Holders -- None
Item 5. Other Information -- None
Item 6. Exhibits and Reports on Form 8-K --
(a) Exhibits --
27.1 Financial Data Schedule.
(b) Reports on Form 8-K filed during the quarter -- None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
American Stores Company
-------------------------------------------
(Registrant)
Dated June 3, 1999 /s/ Neal J. Rider
------------ -------------------------------------------
Neal J. Rider
Chief Financial Officer
(Principal Financial Officer)
Dated June 3, 1999 /s/ Kathleen E. McDermott
------------ --------------------------------------------
Kathleen E. McDermott
Chief Legal Officer and Assistant Secretary
Dated June 3, 1999 /s/ Bradley M. Vierig
------------ --------------------------------------------
Bradley M. Vierig
Senior Vice President and Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and income statements for the thirteen week period ended May 1, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> MAY-01-1999
<CASH> 41,160
<SECURITIES> 0
<RECEIVABLES> 399,726
<ALLOWANCES> 0
<INVENTORY> 1,734,785
<CURRENT-ASSETS> 2,314,835
<PP&E> 7,355,435
<DEPRECIATION> 2,692,856
<TOTAL-ASSETS> 8,930,779
<CURRENT-LIABILITIES> 1,908,203
<BONDS> 3,531,023
0
0
<COMMON> 299,778
<OTHER-SE> 2,451,534
<TOTAL-LIABILITY-AND-EQUITY> 8,930,779
<SALES> 5,047,723
<TOTAL-REVENUES> 5,047,723
<CGS> 3,706,679
<TOTAL-COSTS> 3,706,679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,220
<INCOME-PRETAX> 174,506
<INCOME-TAX> 73,086
<INCOME-CONTINUING> 101,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,420
<EPS-BASIC> .37<F1>
<EPS-DILUTED> .36<F1>
<FN>
<F1> EPS are not in (000's)
</FN>
</TABLE>
