EXHIBIT 13
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
The Company has reported record sales and earnings for 24 consecutive years.
Sales for 1993 (a 53-week year) were $11.3 billion compared to $10.2 billion
in 1992 and $8.7 billion in 1991. Sales for 1993 increased 8.8% when
compared on a 52-week basis to 1992. Increases in sales are attributable to
a number of factors including: identical store sales increases, the purchase
of 74 Jewel Osco stores on April 13, 1992, the continued expansion of net
square footage from new stores and inflation. Identical store sales, stores
that have been in operation for two full fiscal years, increased 2.8% (on a
comparable 53-week basis) in 1993, 1.8% in 1992 and 1.1% in 1991. Identical
store sales continued to increase through higher average ticket sales per
customer. Management estimates that inflation accounted for approximately
0.6% of the 1993 identical store sales increase, compared to 1.7% in 1992
and 0.7% in 1991. During 1993, the Company opened 39 stores (6 of which were
acquired), remodeled 42 stores and closed 19 stores for a net square footage
increase of 1,246,000 square feet. Net square footage increased 4.1% in 1993
as compared to 23.0% in 1992 and 7.8% in 1991.
The following table sets forth certain income statement components expressed
as a percent to sales and the year-to-year percentage changes in the amounts
of such components:
Percent to sales Percentage change
__________________________ ___________________
1993 1992 1991
vs. vs. vs.
1993 1992 1991 1992 1991 1990
________________________________________________________________________________
Sales 100.00% 100.00% 100.00% 10.9% 17.2% 5.6%
Gross profit 24.74 24.11 23.98 13.8 17.8 8.1
Operating and
administrative
expenses 19.16 19.41 19.21 9.4 18.5 7.6
Operating profit 5.58 4.70 4.77 31.8 15.4 10.3
Net interest expense 0.45 0.42 0.27 18.2 86.6 (6.9)
Nonrecurring charge 0.26
Earnings before income
taxes and cumulative
effects of
accounting changes 4.89 4.36 4.68 24.5 9.2 11.0
Net earnings 3.01 2.65 2.97 26.2 4.4 10.3
Gross profit, as a percent to sales, increased due primarily to the
expansion and increased utilization of Company-operated distribution
facilities. During 1993, the Company's distribution system provided 70% of
all products purchased by retail stores as compared to 66% in 1992 and 65%
in 1991. Utilization of the Company's distribution system has enabled
the Company to improve its control over product costs and product
distribution. The pre-tax LIFO adjustment, as a percent to sales, reduced
gross margin by 0.06% in 1993, 0.12% in 1992 and 0.13% in 1991.
The 1992 increase in operating and administrative expenses, as a percent to
sales, was due primarily to one-time costs associated with the Jewel Osco
Acquisition. The Company continues to emphasize cost containment programs as
well as increased productivity in an effort to reduce operating expenses as
a percent to sales. In addition, the Company expects to benefit from the
enhanced productivity and continued expansion of retail automation systems,
such as Time and Attendance, Direct Store Delivery, Electronic Data
Capturing, Electronic Mail and Electronic Payment.
Net interest expense for 1993 included a reduction of approximately $9.7 million
due to the successful resolution of a tax issue for which interest expense had
previously been accrued. Excluding this adjustment, net interest expense, as a
percent to sales, would have increased to 0.54%. This increase
resulted from borrowings associated with the Company's purchase of its
common stock from the estate of J. A. Albertson on March 10, 1993. The 1992
increase in net interest expense resulted from new borrowings associated
with the Jewel Osco Acquisition.
Net earnings for 1993 included adjustments for a nonrecurring charge to
cover the settlement of the Babbitt v. Albertson's lawsuit, an employment
discrimination class action lawsuit filed in 1992, and a decrease in
interest expense due primarily to the successful resolution of a tax issue,
both of which were recognized in the third quarter of 1993. Net earnings for
1992 included certain one-time costs primarily associated with the Jewel
Osco Acquisition and two accounting changes, all of which were recognized in
the first quarter of 1992. The following comparisons of 1993 and 1992
exclude these adjustments:
- Gross margin increased to 24.74% from 24.33%.
- Operating and administrative expenses, as a percent to sales, decreased
to 19.16% from 19.19%.
- Operating profit increased 21.2% to $629.6 million from $519.5 million.
- Net earnings increased 14.7% to $352.1 million from $307.1 million.
- Net earnings, as a percent to sales, increased to 3.12% from 3.04%.
- Earnings per share increased 19.8% to $1.39 from $1.16.
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, "Employers' Accounting for Postemployment Benefits." This new statement
is effective for fiscal years beginning after December 15, 1993 and requires
an accrual for certain benefits paid to former or inactive employees after
employment but before retirement. Based on the Company's evaluation of the
Statement's requirements, adoption in the first quarter of 1994 is expected
to reduce net earnings by approximately $6.4 million.
Liquidity and Capital Resources
The Company's operating results continue to enhance its financial position
and ability to continue its planned expansion program. Cash provided by
operating activities during 1993 was $585 million as compared to $498
million in 1992 and $406 million in 1991. These amounts have enabled the
Company to fund its capital expansion program (aside from the 1992 Jewel
Osco Acquisition), pay dividends and purchase shares of its common stock on
the open market. During 1993, the Company spent $436 million on capital
expenditures, $32 million to reduce long-term debt and $90 million for the
payment of dividends (which represents 26.4% of current net earnings). The
Company also utilizes its commercial paper program to supplement cash
requirements resulting from seasonal fluctuations created by the Company's
capital expenditure program and changes in working capital. Accordingly,
commercial paper borrowings will fluctuate between the Company's quarterly
reporting periods. The Company had $79.9 million of commercial paper
borrowings outstanding at February 3, 1994 compared to $110 million at
January 28, 1993. As of February 3, 1994, the Company had available lines of
credit of $235 million, of which $200 million was reserved as alternative
funding for the Company's commercial paper program.
On March 10, 1993, pursuant to a 1979 agreement, the Company purchased
21,976,320 shares of its common stock from the estate of J. A. Albertson,
the Company's founder, at a cost of $518 million or $23.55 per share. This
purchase was financed through the reissuance of 10,400,000 shares of
treasury stock at $26.25 per share, netting $265 million, and the issuance
of $252 million in medium-term notes. The effect of these transactions was
to retire the remaining 11,576,320 treasury shares at a net cost to the
Company of $21.85 per share.
Since 1987, the Board of Directors has continuously adopted or renewed plans
under which the Company is authorized, but not required, to purchase shares
of its common stock on the open market. The current plan was adopted by the
Board on March 7, 1994 and authorizes the Company to purchase up to 2.5
million shares through March 31, 1995. The Company did not purchase any
shares during 1993 or 1992 and purchased and retired an equivalent of
approximately 4.2 million shares during 1991 under these programs.
The following leverage ratios demonstrate the Company's levels of long-term
financing as of the indicated year end:
February 3, January 28, January 30,
1994 1993 1992
______________________________________________________________________________
Long-term debt (including capitalized
lease obligations) to equity 47.9% 36.6% 12.6%
Long-term debt (including capitalized
lease obligations) to total assets 20.2% 17.3% 6.8%
During 1993, the Company changed the classification of its store types to
better reflect the store formats the Company is developing today.
Consequently, the superstore format has been eliminated and the Company now
classifies all stores over 35,000 square feet (except warehouse stores) as
combination food-drug stores.
During 1993, the Company opened 35 combination food-drug stores, 2 warehouse
stores and 2 conventional stores. The average size of these stores, 48,300
square feet, increased the Company's average store size to 46,400 square
feet. At February 3, 1994, 91% of the Company's square footage consisted of
stores over 35,000 square feet. Square footage has also increased because of
the Company's remodel program. In 1993, 8 of the 42 remodeled stores were
expanded in size. The Company continues to retain ownership of real estate
when possible.
During the past five years the Company has invested $295 million (excluding
inventory) into its distribution operations and has added 3.6 million square
feet of new or expanded facilities. A new 687,000 square-foot full-line
distribution center in Tolleson, Arizona, located in the Phoenix
metropolitan area, became fully operational in August 1993. The Company also
purchased an existing 818,000 square-foot warehouse in Plant City, Florida
in February 1993. This center was remodeled and expanded to approximately
954,000 square feet to add frozen and perishable storage areas. It began
limited operations in December 1993 and became fully operational in March
1994. With the opening of the Plant City, Florida Distribution Center, the
Company now services all of its retail stores from company-owned
distribution centers.
Capital expenditures for 1994 (excluding amounts anticipated to be financed
by operating leases of approximately $29 million) are expected to be
approximately $460 million. New stores and remodeling will continue to be
the most significant part of planned capital expenditures. The Company is
committed to keeping its stores up to date. In the last three years the
Company has opened and remodeled 304 stores representing 14.7 million square
feet. The following is a summary of capital expenditures excluding operating
leases but including the Jewel Osco Acquisition in 1992, capital leases and
assets acquired with related debt (in thousands):
1994
(Projected) 1993 1992 1991 1990
________________________________________________________________________________
New and acquired stores $267,000 $246,052 $466,246 $163,072 $169,170
Remodels 93,000 82,409 74,914 55,803 49,277
Retail replacement equip-
ment and technological
upgrades 49,000 20,804 10,793 8,341 8,814
Distribution facilities
and equipment 39,000 100,936 81,024 27,465 9,115
Other 12,000 5,963 9,880 18,315 21,200
____________________________________________________
$460,000 $456,164 $642,857 $272,996 $257,576
____________________________________________________
Note: Share and per share data adjusted to reflect the two-for-one stock
split distributed October 4, 1993.
Consolidated Earnings
(In thousands except per share data)
53 Weeks 52 Weeks 52 Weeks
February 3, January 28, January 30,
1994 1993 1992
_______________________________________________________________________________
Sales $11,283,678 $10,173,676 $8,680,467
Cost of sales 8,492,524 7,720,824 6,598,950
_____________________________________
Gross profit 2,791,154 2,452,852 2,081,517
Operating and administrative expenses 2,161,561 1,975,079 1,667,355
_____________________________________
Operating profit 629,593 477,773 414,162
Other (expenses) income:
Interest, net (50,984) (43,124) (23,106)
Other, net 3,506 9,072 15,338
Nonrecurring charge (29,900)
_____________________________________
Earnings before income taxes and
cumulative effects of accounting
changes 552,215 443,721 406,394
Income taxes 212,534 167,646 148,600
_____________________________________
Earnings before cumulative effects of
accounting changes 339,681 276,075 257,794
Cumulative effects of accounting changes:
Postretirement health care benefits (4,093)
Accounting for income taxes (2,765)
_____________________________________
Net Earnings $ 339,681 $ 269,217 $ 257,794
_____________________________________
Earnings per share before cumulative
effects of accounting changes $ 1.34 $ 1.04 $ .97
Cumulative effects of accounting changes:
Postretirement health care benefits (0.01)
Accounting for income taxes (0.01)
_____________________________________
Earnings Per Share $ 1.34 $ 1.02 $ .97
_____________________________________
Average number of shares outstanding 254,227 264,418 266,339
See Notes to Consolidated Financial Statements.
</TABLE
<TABEL>
Consolidated Cash Flows
(In thousands)
53 Weeks 52 Weeks 52 Weeks
February 3, January 28, January 30,
1994 1993 1992
_______________________________________________________________________________
Cash Flows From Operating Activities:
Net earnings $ 339,681 $ 269,217 $ 257,794
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 196,427 171,724 132,813
Net deferred income taxes (12,016) 8,462 (12,912)
Cumulative effects of accounting
changes 6,858
Changes in operating assets and
liabilities, net of acquisition:
Receivables and prepaid expenses (24,194) (36,114) (2,572)
Inventories (41,633) (72,955) (50,520)
Accounts payable 84,601 104,614 8,572
Other current liabilities 23,836 38,570 17,103
Self-insurance 10,192 4,788 14,890
Unearned income (609) (7,859) 31,667
Other long-term liabilities 8,230 10,671 8,747
___________________________________
Net cash provided by operating
activities 584,515 497,976 405,582
Cash Flows From Investing Activities:
Acquisition of business, net of
cash acquired (428,860)
Capital expenditures excluding
noncash items (435,526) (331,160) (268,500)
Proceeds from disposals of land,
buildings and equipment 20,874 18,053 12,696
Increase in other assets (3,719) (14,808) (4,618)
___________________________________
Net cash used in investing activities (418,371) (756,775) (260,422)
Cash Flows From Financing Activities:
Net line of credit activity 5,000 (25,000) 20,000
Proceeds from long-term borrowings 252,075 443,000
Payments on long-term borrowings (32,158) (43,497) (10,403)
Net commercial paper activity (30,090) (33,000)
Proceeds from stock options exercised 4,484 4,390 8,028
Purchase of treasury shares (517,526)
Net proceeds from issuance of
treasury shares 264,527
Cash dividends paid (89,534) (81,957) (72,008)
Stock purchases (79,806)
___________________________________
Net cash (used in) provided by
financing activities (143,222) 263,936 (134,189)
___________________________________
Net Increase in Cash and Cash
Equivalents 22,922 5,137 10,971
Cash and Cash Equivalents at
Beginning of Year 39,541 34,404 23,433
___________________________________
Cash and Cash Equivalents at End
of Year $ 62,463 $ 39,541 $ 34,404
___________________________________
See Notes to Consolidated Financial Statements.
</TABLE
Consolidated Balance Sheets
(Dollars in thousands)
February 3, January 28, January 30,
1994 1993 1992
_______________________________________________________________________________
ASSETS
Current Assets:
Cash and cash equivalents $ 62,463 $ 39,541 $ 34,404
Accounts and notes receivable 114,493 90,945 55,835
Inventories 871,719 830,086 613,233
Prepaid expenses 13,589 12,943 10,602
Deferred income taxes 59,967 39,948 37,212
____________________________________
Total Current Assets 1,122,231 1,013,463 751,286
Other Assets 90,810 87,091 72,283
Land, Buildings and Equipment:
Land 467,392 415,911 289,526
Buildings 1,097,681 930,883 721,280
Fixtures and equipment 1,130,735 1,001,627 835,592
Leasehold improvements 257,566 231,533 180,034
Capitalized leases 155,798 147,316 139,773
____________________________________
3,109,172 2,727,270 2,166,205
Less accumulated depreciation
and amortization 1,027,318 882,251 773,527
____________________________________
2,081,854 1,845,019 1,392,678
____________________________________
$3,294,895 $2,945,573 $2,216,247
____________________________________
See Notes to Consolidated Financial Statements.
</TABLE
Consolidated Balance Sheets
(Dollars in thousands)
February 3, January 28, January 30,
1994 1993 1992
_______________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 600,376 $ 515,775 $ 400,417
Notes payable 10,000 5,000 30,000
Salaries and related liabilities 101,443 95,820 80,719
Taxes other than income taxes 38,095 41,522 37,807
Income taxes 48,622 29,592 9,589
Self-insurance 58,436 51,870 47,238
Unearned income 19,927 15,567 16,429
Other 30,277 26,033 20,826
Current maturities of long-term debt 76,692 25,757 3,588
Current capitalized lease obligations 6,194 6,044 5,634
____________________________________
Total Current Liabilities 990,062 812,980 652,247
Long-Term Debt 554,092 404,476 52,510
Capitalized Lease Obligations 110,919 103,764 99,159
Other Long-Term Liabilities and
Deferred Credits:
Deferred compensation 31,684 28,016 24,755
Deferred income taxes 28,766 20,763 9,219
Deferred rents payable 72,251 69,864 66,575
Self-insurance 83,857 80,231 80,075
Unearned income 10,825 15,794 22,791
Other 23,060 21,257 9,464
____________________________________
250,443 235,925 212,879
Stockholders' Equity:
Preferred stock - $1.00 par value;
authorized - 10,000,000 shares;
issued - none
Common stock - $1.00 par value;
authorized - 600,000,000 shares;
issued - 253,406,983 shares,
132,329,428 shares and 132,130,528
shares, respectively 253,407 132,330 132,131
Capital in excess of par value 2,117 4,909 718
Retained earnings 1,133,855 1,251,189 1,066,603
____________________________________
1,389,379 1,388,428 1,199,452
____________________________________
$3,294,895 $2,945,573 $2,216,247
____________________________________
See Notes to Consolidated Financial Statements.
</TABLE
Consolidated Stockholders'
Equity
(In thousands except per share data)
Common Capital
Stock in Excess
$1.00 Par of Par Retained Treasury
Value Value Earnings Stock Total
_______________________________________________________________________________
Balance at Jan. 31, 1991 $133,820 $ 2,131 $ 951,931 $1,087,882
Exercise of stock
options 395 3,097 3,492
Tax benefits related to
stock options 4,536 4,536
Cash dividends, $.28 per
share (74,446) (74,446)
Stock purchases (2,084) (9,046) (68,676) (79,806)
Net earnings 257,794 257,794
_____________________________________________________
Balance at Jan. 30, 1992 132,131 718 1,066,603 1,199,452
Exercise of stock
options 199 1,475 1,674
Tax benefits related to
stock options 2,716 2,716
Cash dividends, $.32 per
share (84,631) (84,631)
Net earnings 269,217 269,217
_____________________________________________________
Balance at Jan. 28, 1993 132,330 4,909 1,251,189 1,388,428
Exercise of stock
options 245 1,700 1,945
Tax benefits related to
stock options 2,538 2,538
Purchase treasury shares $(517,526) (517,526)
Issue treasury shares 19,615 244,912 264,527
Retire treasury shares (5,788) (25,010) (241,816) 272,614
Two-for-one stock split 126,620 (1,635) (124,985)
Other 953 953
Cash dividends, $.36 per
share (91,167) (91,167)
Net earnings 339,681 339,681
_____________________________________________________
Balance at Feb. 3, 1994 $253,407 $ 2,117 $1,133,855 $1,389,379
_____________________________________________________
See Notes to Consolidated Financial Statements.
</TABLE
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
Fiscal Year End The Company's fiscal year ends on the Thursday nearest to
January 31 each year. Unless the context otherwise indicates, reference to a
fiscal year of the Company refers to the calendar year in which such fiscal
year commences.
Consolidation The consolidated financial statements include the results of
operations, account balances and cash flows of the Company and its wholly
owned subsidiaries. All material intercompany balances have been eliminated.
Cash and Cash Equivalents The Company considers all highly liquid
investments with a maturity of three months or less at the time of purchase
to be cash equivalents.
Inventories The Company values inventories at the lower of cost or market.
Cost of substantially all inventories is determined on a last-in, first-out
(LIFO) basis. Cost of remaining inventories is determined on a first-in,
first-out (FIFO) basis.
Capitalization, Depreciation and Amortization Land, buildings and equipment
are recorded at cost. Depreciation is provided on the straight-line method
over the estimated useful life of the asset.
The costs of major remodeling and improvements on leased stores are
capitalized as leasehold improvements. Leasehold improvements are amortized
on the straight-line method over the shorter of the life of the applicable
lease or the useful life of the asset. Capital leases are recorded at the
lower of fair market value or the present value of future minimum lease
payments. These leases are amortized on the straight-line method over their
primary term.
Beneficial lease rights and lease liabilities are recorded on purchased
leases based on differences between contractual rents under the respective
lease agreements and prevailing market rents at the date of the acquisition
of the lease. Beneficial lease rights are amortized over the lease term
using the straight-line method. Lease liabilities are amortized over the
lease term using the interest method.
Upon disposal of fixed assets, the appropriate property accounts are reduced
by the related costs and accumulated depreciation and amortization. The
resulting gains and losses are reflected in the consolidated earnings.
Store Opening and Closing Costs Noncapital expenditures incurred in opening
new stores or remodeling existing stores are expensed in the year in which
they are incurred. When a store is closed the remaining investment in fixed
assets, net of expected salvage value, is expensed. For properties under
lease agreements, the present value of any remaining liability under the
lease, net of expected sublease recovery, is also expensed.
Self-Insurance The Company is primarily self-insured for property loss,
workers' compensation and general liability costs. Self-insurance
liabilities are based on claims filed and estimates for claims incurred but
not reported. These liabilities are not discounted.
Stock Options Proceeds from the sale of newly issued stock to employees
under the Company's stock option plans are credited to common stock to the
extent of par value and the excess to capital in excess of par value. With
respect to nonqualified stock options, the difference between the option
exercise price and market value of the stock at date of grant is charged to
operations over the vesting period. Income tax benefits attributable to
stock options exercised are credited to capital in excess of par value.
Income Taxes The Company provides for deferred income taxes resulting from
timing differences in reporting certain income and expense items for income
tax and financial accounting purposes. The major timing differences and
their net effect are shown in the "Income Taxes" note.
The 1993 and 1992 tax provisions were computed in accordance with SFAS No.
109, "Accounting for Income Taxes." The 1991 tax provision was computed in
accordance with APB Opinion No. 11.
Investment tax credits have been deferred and are being amortized over the
remaining useful life of the related asset.
Earnings Per Share Earnings per share are computed by dividing consolidated
net earnings by the weighted average number of shares outstanding.
Equivalent shares in the form of stock options are excluded from the
calculation since they are not materially dilutive.
Stock Split On August 30, 1993, the Board of Directors approved a two-for-
one stock split, effected in the form of a 100% stock dividend payable to
stockholders of record at the close of business on September 17, 1993 and
distributed on October 4, 1993. All references in the financial statements
to the number of shares (except outstanding shares at year end), related
prices and per share amounts have been restated to reflect the split.
Reclassifications Certain reclassifications have been made in prior years'
financial statements to conform to classifications used in the current year.
Nonrecurring Charge
During the third quarter of 1993 a $29.9 million nonrecurring charge was
recorded to cover a $29.5 million settlement of the Babbitt v. Albertson's
lawsuit, an employment discrimination class action lawsuit filed in 1992.
The nonrecurring charge covers the full cost of the settlement including
compliance with the consent decree and plaintiffs' attorney fees, as well as
all expenses associated with its implementation. This nonrecurring charge
does not reflect possible recovery from insurance coverage, which the
Company is pursuing in litigation against several carriers. The Company
expects to recover a portion of the overall settlement from its insurance
carriers, although any recovery amount has not been determined.
Supplemental Cash Flow Information
Selected cash payments and noncash activities were as follows (in thousands):
1993 1992 1991
______________________________________________________________________________
Cash payments for income taxes $202,472 $143,045 $158,377
Cash payments for interest,
net of amounts capitalized 36,311 27,819 15,037
Noncash investing and financing activities:
Liabilities assumed in connection with
business acquisition 12,385
Liabilities assumed in connection with
asset acquisitions 5,590 25
Capitalized lease obligations incurred 15,048 12,647 4,471
Capitalized lease obligations terminated 1,656 2,203
Acquisition
On April 13, 1992, the Company purchased 74 Jewel Osco combination food-drug
stores, a general merchandise warehouse in Ponca City, Oklahoma and related
assets, including potential store locations, from American Stores Company
(the Acquisition). The Acquisition included stores located in Texas (52
stores), Oklahoma (14 stores), Florida (7 stores) and Arkansas (1 store).
The majority of the acquired stores are located in existing operating areas
of the Company, and the Company is continuing to operate most of these
stores as combination food-drug stores under the Albertson's name. The
Acquisition was accounted for using the purchase method of accounting.
The purchase price, based upon the book value of fixed assets and cost of
inventory, was approximately $442 million, including approximately $144
million for inventory. The purchase price included real estate for 41
operating stores and the general merchandise warehouse. The remaining 33
operating stores are subject to leases that have been assumed by the
Company. The Acquisition was ultimately financed through proceeds from
commercial paper borrowings and offerings of senior unsecured debt
securities. The results of operations of the acquired properties have been
included in the consolidated financial statements from the date of
acquisition.
Accounts and Notes Receivable
Accounts and notes receivable consist of the following (in thousands):
February 3, January 28, January 30,
1994 1993 1992
_____________________________________________________________________________
Trade accounts receivable $113,335 $86,239 $54,832
Trade notes receivable 2,191 5,813 1,658
Allowance for doubtful accounts (1,033) (1,107) (655)
___________________________________
$114,493 $90,945 $55,835
___________________________________
Inventories
Approximately 96% of the Company's inventories are valued using the last-in,
first-out (LIFO) method. If the first-in, first-out (FIFO) method had been
used, inventories would have been $191,592,000, $185,150,000 and
$172,470,000 higher at the end of 1993, 1992 and 1991, respectively. Net
earnings would have been higher by $3,962,000 ($.02 per share) in 1993,
$7,964,000 ($.03 per share) in 1992 and $7,354,000 ($.03 per share) in 1991.
The replacement cost of inventories valued at LIFO approximates FIFO cost.
Indebtedness
Long-term debt includes the following (in thousands):
February 3, January 28, January 30,
1994 1993 1992
_____________________________________________________________________________
Unsecured 6.375% notes due May 1995 $150,000 $150,000
Medium-term notes, unsecured:
Due May 1993 (4.29% interest) 25,000
Due May 1994 (5.49% interest) 75,000 75,000
Due May 1995 (6.15% interest) 50,000 50,000
Due March 1996 (4.86% interest) 77,000
Due March 1998 (5.68% interest) 85,425
Due March 2000 (6.14% interest) 89,650
Commercial paper 79,910 110,000
Industrial revenue bonds 17,305 18,040 $18,590
Mortgage notes 6,083 1,807 24,252
Other unsecured notes payable 411 386 13,256
___________________________________
630,784 430,233 56,098
Less current maturities (76,692) (25,757) (3,588)
___________________________________
$554,092 $404,476 $52,510
___________________________________
In connection with the Company's purchase of its common stock from the
estate of J.A. Albertson, the Company's founder, $252.1 million of medium-
term notes due from 1996 to 2000 were issued under a shelf registration
statement filed with the Securities and Exchange Commission in 1993.
Interest on these notes is paid semiannually.
In connection with the 1992 Jewel Osco Acquisition and subsequent issuance
of the 6.375% notes and medium-term notes due from 1993 to 1995, a shelf
registration statement was filed with the Securities and Exchange Commission
in 1992 covering debt securities in the amount of $500 million available for
issuance from time to time. As of February 3, 1994, $200 million of the debt
remained available for issuance in the form of medium-term notes. Interest
on the 6.375% notes and medium-term notes is paid semiannually.
The Company has in place a $200 million commercial paper program. Interest
on the outstanding commercial paper borrowings ranges from 3.10% to 3.17%
with an effective weighted average rate of 3.13%. The Company has
established the necessary credit facilities, through its revolving credit
agreement, to refinance the commercial paper borrowings on a long-term
basis. These borrowings have been classified as noncurrent because it is the
Company's intent to refinance these obligations on a long-term basis.
The industrial revenue bonds are payable in varying annual installments
through 2011, with interest paid semiannually at 3.3% to 10.875%.
The Company has pledged real estate with a cost of $14,008,000 as collateral
for the mortgage notes, which are payable monthly, quarterly and semi-
annually, including interest at 7.5% to 16.5%. The notes mature from 1994 to
2011.
The scheduled maturities of long-term debt outstanding at February 3, 1994
are summarized as follows: $76,692,000 in 1994, $201,146,000 in 1995,
$78,281,000 in 1996, $80,942,000 in 1997, $86,560,000 in 1998 and
$107,163,000 thereafter.
In March 1992, the Company amended its revolving credit agreement with
several banks, whereby the Company may borrow principal amounts up to $200
million at varying interest rates any time prior to April 1, 1997. The
agreement contains certain covenants, the most restrictive of which requires
the Company to maintain consolidated tangible net worth, as defined, of at
least $750 million.
In addition to amounts available under the revolving credit agreement, the
Company had available lines of credit from banks at prevailing interest
rates in the amount of $35 million at February 3, 1994. The cash balances
maintained at these banks are not legally restricted.
Interest expense, net, was as follows (in thousands):
1993 1992 1991
______________________________________________________________________________
Debt $32,164 $26,862 $10,876
Capitalized leases 12,233 11,560 12,278
Capitalized interest (4,219) (4,617) (5,013)
_______________________________
Interest expense 40,178 33,805 18,141
Net bank service charges 10,806 9,319 4,965
_______________________________
Interest expense, net $50,984 $43,124 $23,106
_______________________________
Interest expense, net for 1993 included a reduction of approximately $9.7
million due to the successful resolution of a tax issue for which interest
had previously been accrued.
Capital Stock
On March 10, 1993, pursuant to a 1979 agreement, the Company purchased
21,976,320 shares of its common stock from the estate of J.A. Albertson, the
Company's founder, at a cost of $517.5 million or $23.55 per share. This
purchase was financed through the reissuance of 10,400,000 shares of
treasury stock at $26.25 per share, netting $264.5 million, and the issuance
of $252.1 million in medium-term notes. The remaining 11,576,320 treasury
shares were retired.
On March 2, 1987, the Board of Directors adopted a stockholder rights plan,
which was amended on August 31, 1987, November 28, 1988 and September 6,
1989. Under the plan, stockholders of record on March 23, 1987 received a
dividend distribution of one nonvoting right for each share of common stock.
Subject to certain exceptions, one right has been or will be issued with
each share of common stock issued after March 23, 1987. The rights are
attached to all common stock certificates and no separate rights certificate
will be distributed. Each right entitles the holder to purchase one share of
the Company's common stock at a price of $32.50. The rights are exercisable
for shares of common stock upon the earlier of the tenth business day
following (i) the public announcement that a person or group has acquired,
or has obtained the right to acquire, beneficial ownership of 20% or more of
the outstanding common stock, or (ii) the commencement of, or public
announcement of an intention to make, a tender offer or exchange offer if,
upon consummation, such person or group would be the beneficial owner of 20%
or more of the then outstanding common stock.
Additionally, if any person or group becomes the beneficial owner of more
than 20% of the outstanding common stock, each right will entitle its
holder, other than such person or group, upon payment of the $32.50 exercise
price, to purchase common stock with a deemed market value of twice the
exercise price. The purchase rights for common stock will not be exercisable
if the 20% acquisition is made pursuant to a tender or exchange offer for
all outstanding common stock which a majority of certain directors of the
Company deem to be in the best interests of the Company and its
stockholders. If there is a merger with an acquirer of 20% or more of the
Company's common stock and the Company is not the surviving corporation, or
more than 50% of the Company's assets or earning power is transferred or
sold, each right will entitle its holder, other than the acquirer, to
purchase, or in certain instances to receive the cash value of, the
acquiring company's common stock with a deemed market value of twice the
exercise price.
All of the rights may be redeemed by the Board of Directors, and under
certain circumstances, with the approval of a majority of the continuing
directors (as defined in the plan), at a price of $.00625 per right until
the earlier of (i) ten business days after the public announcement that a
person or group has acquired beneficial ownership of 20% or more of the
outstanding common stock or (ii) the date the stockholder rights plan
expires. The rights, which are not entitled to dividends, expire on March
23, 1997.
Since 1987, the Board of Directors has continuously adopted or renewed plans
under which the Company is authorized, but not required, to purchase shares
of its common stock on the open market. The current plan was adopted by the
Board on March 7, 1994 and authorizes the Company to purchase up to 2.5
million shares through March 31, 1995. The Company has purchased and retired
an equivalent of approximately 12.4 million shares of its common stock for
approximately $156.2 million under these plans.
Income Taxes
At the beginning of 1992, the Company elected early adoption of the
provisions of SFAS No. 109, "Accounting for Income Taxes." This Statement
requires that the liability method of accounting for income taxes be used
rather than the deferred method previously used. The Company elected not to
restate prior years' consolidated financial statements. The cumulative
effect of this accounting change was to decrease 1992 net earnings by $2.8
million or $.01 per share.
Deferred tax assets and liabilities consist of the following (in thousands):
February 3, January 28,
1994 1993
_______________________________________________________________________________
Deferred tax assets:
Nondeductible accruals for:
Self-insurance $ 54,811 $ 49,446
Lease accounting 21,626 20,335
Vacations 17,129 14,332
Litigation 11,968
Property valuation 8,828 5,197
Deferred compensation 5,742 5,007
Pension costs 2,133 1,683
Other 5,955 5,652
Income unearned for financial reporting purposes 11,846 11,739
Costs capitalized for tax purposes 10,803 5,808
_______________________
Total deferred tax assets 150,841 119,199
Deferred tax liabilities:
Accelerated depreciation for tax purposes (103,219) (86,441)
Pension costs expensed for tax purposes (13,312) (10,000)
Other (3,109) (3,573)
_______________________
Total deferred tax liabilities (119,640) (100,014)
_______________________
Net deferred tax assets $ 31,201 $ 19,185
_______________________
No valuation allowances were considered necessary in the calculation of
deferred tax assets.
Income tax expense on continuing operations consists of the following (in
thousands):
1993 1992 1991
_______________________________________________________________________________
Current:
Federal $191,343 $133,872 $139,793
State 33,580 26,052 22,778
________________________________
224,923 159,924 162,571
Deferred:
Federal (10,222) 7,193 (11,270)
State (1,794) 1,269 (1,642)
________________________________
(12,016) 8,462 (12,912)
Amortization of deferred investment
tax credits (373) (740) (1,059)
________________________________
$212,534 $167,646 $148,600
________________________________
Deferred taxes resulted from:
Income unearned for financial reporting
purposes $ (107) $ 1,871 $(13,198)
Accelerated depreciation for tax purposes 16,778 9,682 4,834
Self-insurance (5,365) (2,179) (5,457)
Litigation (11,968)
Costs capitalized for tax purposes (4,994) (129) (559)
Property valuation (3,631) (152) 836
Other (2,729) (631) 632
________________________________
$(12,016) $ 8,462 $(12,912)
________________________________
Total tax expense for 1992 was $167,992,000 consisting of taxes on
continuing operations of $167,646,000, tax expense of $2,765,000 for the
cumulative effect of a change in accounting for income taxes and tax
benefits of $2,419,000 attributed to the cumulative effect of a change in
accounting for postretirement health care benefits.
The reconciliations between the federal statutory tax rate and the Company's
effective tax rates are as follows (in thousands):
1993 % 1992 % 1991 %
________________________________________________________________________________
Taxes computed at statutory rate $193,275 35.0 $150,865 34.0 $138,174 34.0
State income taxes net of
federal income tax benefit 20,612 3.8 16,364 3.7 14,047 3.5
Amortization of deferred
investment tax credits (373) (0.1) (740) (0.2) (1,059) (0.3)
Other (980) (0.2) 1,157 0.3 (2,562) (0.6)
______________________________________________
$212,534 38.5 $167,646 37.8 $148,600 36.6
______________________________________________
Stock Options
The Company has stock options outstanding under plans adopted in 1986, 1982
and 1975. The 1986 plan authorized the granting of options with respect to
8,000,000 shares of the Company's common stock. The 1982 plan expired on
February 29, 1992 and the 1975 plan expired on April 6, 1985. Expiration of
the 1982 plan and 1975 plan did not affect the rights of optionees for any
options outstanding and not exercised in full.
The changes in the number of shares reserved for outstanding options under
the plans are summarized as follows:
Option Number
Price Per Share of Shares
______________________________________________________________________________
Balance at January 31, 1991 $ .88 to $16.56 4,075,800
Granted 16.88 to 22.63 1,480,000
Exercised .88 to 13.56 (792,600)
Forfeited 1.88 to 22.63 (371,800)
Canceled 22.63 to 22.63 (159,000)
_____________________________
Balance at January 30, 1992 .88 to 22.63 4,232,400
Granted 24.31 to 24.31 344,000
Exercised .88 to 6.25 (398,400)
Forfeited 2.95 to 16.88 (128,200)
_____________________________
Balance at January 28, 1993 1.88 to 24.31 4,049,800
Granted 25.13 to 25.13 479,000
Exercised 1.88 to 8.69 (327,947)
Forfeited 2.95 to 24.31 (145,200)
Canceled 24.31 to 24.31 (4,000)
_____________________________
Balance at February 3, 1994 $ 1.88 to $25.13 4,051,653
_____________________________
Options on 262,053 shares were exercisable at February 3, 1994. In addition,
there were 3,942,400 shares of common stock under the 1986 plan reserved for
the granting of additional options.
Employee Benefit Plans
Substantially all employees working over 20 hours per week are covered by
retirement plans. Union employees participate in multi-employer retirement
plans under collective bargaining agreements. The Company sponsors two
funded plans, Albertson's Salaried Employees Pension Plan and Albertson's
Employees Corporate Pension Plan, which are defined benefit, noncontributory
plans for eligible employees who are 21 years of age with one or more years
of service and (with certain exceptions) are not covered by collective
bargaining agreements. Benefits paid to retirees are based upon age at
retirement, years of credited service and average compensation. The
Company's funding policy for these plans is to contribute amounts deductible
for federal income tax purposes.
Assets of the two funded Company plans are invested in directed trusts.
Assets in the directed trusts are invested in common stocks (including
$28,937,000, $26,802,000 and $21,565,000 of the Company's common stock at
February 3, 1994, January 28, 1993 and January 30, 1992, respectively), U.S.
Government obligations, corporate bonds, international equity funds, real
estate and money market funds.
The Company also sponsors an unfunded Executive Pension Makeup Plan. This
plan is nonqualified and provides certain key employees defined pension
benefits which supplement those provided by the Company's other retirement
plans.
Net periodic pension cost for the Company plans was as follows (in
thousands):
1993 1992 1991
______________________________________________________________________________
Service cost - benefits earned during
the period $ 12,726 $ 10,983 $ 8,560
Interest cost on projected benefit obligations 12,687 10,805 8,956
Actual return on assets (27,696) (15,596) (17,668)
Net amortization and deferral 11,515 1,809 6,076
________________________________
Net periodic pension cost $ 9,232 $ 8,001 $ 5,924
________________________________
Assumptions used in the computation of net periodic pension cost for all
Company-sponsored plans were as follows:
1993 1992 1991
______________________________________________________________________________
Weighted-average discount rate 7.0% 8.0% 8.5%
Annual salary increases 4.5% 4.5% 5.5%
Expected long-term rate of return on assets 9.0% 9.0% 9.0%
The following table sets forth the funding status of Albertson's Salaried
Employees Pension Plan and Albertson's Employees Corporate Pension Plan and
the amounts included in other assets in the Company's consolidated balance
sheets (in thousands):
February 3, January 28, January 30,
1994 1993 1992
_______________________________________________________________________________
Plan assets at fair value $218,284 $177,825 $150,603
Actuarial present value of:
Vested benefits 155,087 101,858 91,924
Nonvested benefits 15,797 7,581 5,136
___________________________________
Accumulated benefit obligation 170,884 109,439 97,060
Effect of projected future salary
increases 38,508 32,308 25,475
___________________________________
Projected benefit obligation 209,392 141,747 122,535
___________________________________
Plan assets in excess of projected benefit
obligation 8,892 36,078 28,068
Unrecognized net loss (gain) 19,713 (15,975) (15,077)
Unrecognized prior service cost 7,123 7,972 8,154
Unrecognized net transition assets (1,171) (1,358) (1,545)
___________________________________
Prepaid pension cost $ 34,557 $ 26,717 $ 19,600
___________________________________
</TABLE
The following table sets forth the status of the unfunded Executive Pension
Makeup Plan and the amounts included in other long-term liabilities in the
Company's consolidated balance sheets (in thousands):
February 3, January 28, January 30,
1994 1993 1992
_______________________________________________________________________________
Actuarial present value of:
Vested benefits $ 6,493 $ 5,490 $ 4,613
Nonvested benefits 9 1 1
__________________________________
Accumulated benefit obligation 6,502 5,491 4,614
Effect of projected future salary
increases 1,861 2,564 2,684
__________________________________
Projected benefit obligation 8,363 8,055 7,298
__________________________________
Actuarial present value of projected benefit
obligations in excess of plan assets (8,363) (8,055) (7,298)
Unrecognized net (gain) loss (7) 458 458
Unrecognized prior service cost 1,136 1,231 1,326
Unrecognized net transition liability 1,688 1,869 2,050
Additional minimum liability (956) (994) (1,150)
__________________________________
Accrued pension cost $(6,502) $(5,491) $(4,614)
__________________________________
The Company also contributes to various plans under industrywide collective
bargaining agreements which provide for pension benefits. Total
contributions to these plans were $16,025,000 for 1993, $19,295,000 for 1992
and $17,705,000 for 1991.
The Company has bonus plans for store management personnel and other key
management personnel. Amounts charged to earnings under all bonus plans were
$53,907,000 for 1993, $52,301,000 for 1992 and $36,205,000 for 1991.
Most retired employees of the Company are eligible to remain in its health
and life insurance plans. Retirees who elect to remain in the Company-
sponsored plans are charged a premium which is equal to the difference
between the estimated costs of the benefits for the retiree group and a
fixed contribution amount made by the Company.
At the beginning of 1992, the Company elected early adoption of the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." 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 employees as of the date of adoption. The
cumulative effect of this accounting change (net of $2.4 million in tax
benefits) was to decrease 1992 net earnings by $4.1 million or $.01 per
share.
Net periodic postretirement benefit cost was as follows (in thousands):
1993 1992
______________________________________________________________________________
Service cost $ 574 $ 528
Interest cost 605 549
__________________
Net periodic postretirement benefit cost $1,179 $1,077
__________________
The following table sets forth the Accrued Postretirement Benefit
Liabilities included in other long-term liabilities in the Company's
consolidated balance sheets (in thousands):
February 3, January 28,
1994 1993
_____________________________________________________________________________
Existing retired employees $1,613 $1,355
Active employees fully eligible 1,800 1,526
Other active employees 5,645 4,354
___________________
Accumulated Postretirement Benefit Obligation (APBO) 9,058 7,235
Unrecognized net loss and effects of changes in
assumptions (963)
_____________________
Accrued postretirement benefit liabilities $8,095 $7,235
_____________________
Assumed discount rate 7.0% 8.0%
Annual rates of increases in health care costs are not applicable in the
calculation of the APBO because the Company's contribution is a fixed
amount.
The Company also contributes to various plans under industrywide collective
bargaining agreements which provide for health care benefits to both active
employees and retirees. Total contributions to these plans were $90,613,000
for 1993 and $83,754,000 for 1992.
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, "Employers' Accounting for Postemployment Benefits." This new statement
is effective for fiscal years beginning after December 15, 1993 and requires
an accrual for certain benefits paid to former or inactive employees after
employment but before retirement. Based on the Company's evaluation of the
Statement's requirements, adoption in the first quarter of 1994 is expected
to reduce net earnings by approximately $6.4 million.
Leases
The Company leases a portion of its real estate. The typical lease period is
25 to 30 years and most leases contain renewal options. Exercise of such
options is dependent on the level of business conducted at the location. In
addition, the Company leases certain equipment. Some leases contain
contingent rental provisions based on sales volume at retail stores or miles
traveled for trucks.
Capitalized leases are calculated using interest rates appropriate at the
inception of each lease. Contingent rents associated with capitalized leases
were $2,716,000 in 1993, $2,428,000 in 1992 and $2,570,000 in 1991.
Following is an analysis of the Company's capitalized leases (in thousands):
February 3, January 28, January 30,
1994 1993 1992
_____________________________________________________________________________
Real estate $154,157 $145,548 $138,116
Equipment 1,641 1,768 1,657
___________________________________
$155,798 $147,316 $139,773
___________________________________
Accumulated amortization $ 73,074 $ 72,176 $ 70,058
___________________________________
Future minimum lease payments for capitalized lease obligations at February
3, 1994 are as follows (in thousands):
Real Estate Equipment Total
______________________________________________________________________________
1994 $ 18,232 $ 374 $ 18,606
1995 18,321 367 18,688
1996 18,094 316 18,410
1997 18,196 175 18,371
1998 17,703 12 17,715
Remainder 137,817 137,817
__________________________________
Total minimum obligations 228,363 1,244 229,607
Less interest (112,253) (241) (112,494)
__________________________________
Present value of net minimum obligations 116,110 1,003 117,113
Less current portion (5,929) (265) (6,194)
__________________________________
Long-term obligations at February 3, 1994 $ 110,181 $ 738 $ 110,919
__________________________________
Minimum obligations have not been reduced by minimum capitalized sublease
rentals of $5,327,000 receivable in the future under noncancelable
capitalized subleases.
Rent expense under operating leases was as follows (in thousands):
1993 1992 1991
_______________________________________________________________________________
Minimum rent $ 66,506 $ 66,130 $ 56,664
Contingent rent 4,641 5,003 4,335
________________________________
71,147 71,133 60,999
Less sublease rent (17,232) (16,511) (14,372)
________________________________
$ 53,915 $ 54,622 $ 46,627
________________________________
Future minimum lease payments for all noncancelable operating leases and
related subleases having a remaining term in excess of one year at February
3, 1994 are as follows (in thousands):
Real Estate Subleases
_______________________________________________________________________________
1994 $ 58,634 $ (14,696)
1995 60,228 (14,880)
1996 60,407 (14,354)
1997 61,216 (13,812)
1998 63,603 (13,264)
Remainder 607,139 (29,712)
_______________________
Total minimum obligations (receivables) $911,227 $(100,718)
_______________________
The present value of minimum rent payments under operating leases using an
assumed interest rate of 9.5% was approximately $429 million at February 3,
1994.
Financial Instruments
Financial instruments with off-balance-sheet risk to the Company include
lease guarantees whereby the Company is contingently liable as a guarantor
of certain leases that were assigned to third parties in connection with
various store closures and outstanding letters of credit primarily
associated with the Company's self-insurance programs. Minimum rentals
guaranteed under assigned leases are $5.1 million in 1994 and aggregate
$65.6 million for the remaining lease terms, which expire at various dates
through 2012. The Company believes the likelihood of a significant loss from
these agreements is remote because of the wide dispersion among third
parties and remedies available to the Company should the primary party fail
to perform under the agreements. As of February 3, 1994, the Company had
letters of credit outstanding of $48.7 million.
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash equivalents and trade
receivables. The Company limits the amount of credit exposure to any one
financial institution and places its temporary cash into investments of high
credit quality. Concentrations of credit risk with respect to trade
receivables are limited due to the dispersion of the Company's customer base
across different industries and geographies.
The estimated fair value of cash and cash equivalents, short-term debt and
commercial paper borrowings approximates their carrying amount. The
estimated fair value of all long-term debt borrowings as of February 3, 1994
was approximately $645.3 million as compared to its carrying amount of
$630.8 million. These fair values were estimated using discounted cash flow
analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements, when quoted market values were not
available. The Company has not determined the fair value of lease guarantees
due to the inherent difficulty in evaluating the credit worthiness of each
tenant.
Legal Proceedings
On March 30, 1992, Super Food Services, Inc. filed a complaint against the
Company in Florida state court (Circuit Court of the Ninth Judicial Circuit,
Orange County, Florida) originally seeking specific performance of an
alleged agreement for the purchase of Super Food's existing Orlando
distribution facilities. Super Food also sought an injunction to force the
Company to maintain its business relationship with Super Food pending
resolution of the litigation. The trial court denied such injunctive relief,
and the court's ruling has been upheld on appeal. Super Food filed an
amended complaint in January of 1993 and is seeking damages of approximately
$97 million for the breach of an alleged oral requirements contract between
Super Food and the Company or, in the alternative, approximately $27 million
in damages for the Company's breach of an alleged agreement to purchase
Super Food's Florida facilities. On March 29, 1994, a final judgment was
granted by the trial court in favor of Albertson's on the $97 million claim,
which final judgment has essentially the same legal effect as the granting
of summary judgment in favor of Albertson's as to that claim. In addition,
after a hearing on March 31, 1994, the trial court indicated that
Albertson's motion for summary judgment on the $27 million claim will be
granted, and an order to that effect will be entered shortly. It is
anticipated that Super Food intends to appeal the foregoing judgments. The
Company continues to believes it has substantial and meritorious defenses to
the claims and will vigorously defend against any appeals that may be taken.
The outcome of any appeals cannot be determined at this time.
The Company is also involved in other routine litigation incidental to
operations. In the opinion of management, the ultimate resolution of the
above described lawsuit and other pending legal proceedings will not have a
material adverse effect on the Company's financial condition or results of
operations.
Responsibility for Financial Reporting
The management of Albertson's, Inc. is responsible for the preparation and
integrity of the consolidated financial statements of the Company. The
accompanying consolidated financial statements have been prepared by the
management of the Company, in accordance with generally accepted accounting
principles, using management's best estimates and judgment where necessary.
Financial information appearing throughout this Annual Report is consistent
with that in the consolidated financial statements.
To help fulfill its responsibility, management maintains a system of
internal controls designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and that transactions are
executed in accordance with management's authorizations and are reflected
accurately in the Company's records. The concept of reasonable assurance is
based on the recognition that the cost of maintaining a system of internal
accounting controls should not exceed benefits expected to be derived from
the system. The Company believes that its long-standing emphasis on the
highest standards of conduct and ethics, set forth in comprehensive written
policies, serves to reinforce its system of internal controls.
Deloitte & Touche, independent auditors, audited the consolidated financial
statements in accordance with generally accepted auditing standards to
independently assess the fair presentation of the Company's financial
position, results of operations and cash flows.
The Audit Committee of the Board of Directors, comprised entirely of outside
directors, oversees the fulfillment by management of its responsibilities
over financial controls and the preparation of financial statements. The
Committee meets with internal and external auditors at least three times per
year to review audit plans and audit results. This provides internal and
external auditors direct access to the Board of Directors.
Management recognizes its responsibility to conduct Albertson's business in
accordance with high ethical standards. This responsibility is reflected in
key policy statements that, among other things, address potentially
conflicting outside business interests of Company employees and specify
proper conduct of business activities. Ongoing communications and review
programs are designed to help ensure compliance with these policies.
Gary G. Michael A. Craig Olson
Chairman of the Board and Senior Vice President, Finance and
Chief Executive Officer Chief Financial Office
Independent Auditors' Report
The Board of Directors and Stockholders of Albertson's, Inc.:
We have audited the accompanying consolidated balance sheets of Albertson's,
Inc. and subsidiaries as of February 3, 1994, January 28, 1993 and January
30, 1992, and the related consolidated statements of earnings, stockholders'
equity and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Albertson's, Inc. and
subsidiaries at February 3, 1994, January 28, 1993 and January 30, 1992, and
the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
As discussed in the Notes to the Consolidated Financial Statements, in
fiscal year 1992 the Company changed its method of accounting for
postretirement benefits other than pensions and for income taxes to conform
with Statements of Financial Accounting Standards No. 106 and 109.
Deloitte & Touche
Boise, Idaho
March 31, 1994
Five Year Summary of Selected Financial Data
(Dollars in thousands except per share data)
53 Weeks 52 Weeks 52 Weeks 52 Weeks 52 Weeks
February 3, January 28, January 30, January 31, February 1,
1994 1993 1992 1991 1990
____________________________________________________________________________________________
Operating Results:
Sales $11,283,678 $10,173,676 $8,680,467 $8,218,562 $7,422,663
Gross profit 2,791,154 2,452,852 2,081,517 1,924,681 1,700,627
Interest expense:
Debt 27,945 22,245 5,863 9,351 5,257
Capitalized lease
obligations 12,233 11,560 12,278 11,786 13,162
Earnings before income
taxes and cumulative
effects of accounting
changes 552,215 443,721 406,394 366,009 309,776
Income taxes 212,534 167,646 148,600 132,235 113,225
Earnings before cumulative
effects of accounting
changes 339,681 276,075 257,794 233,774 196,551
Cumulative effects of
accounting changes (6,858)
Net earnings 339,681 269,217 257,794 233,774 196,551
Net earnings as a percent
to sales 3.01% 2.65% 2.97% 2.84% 2.65%
________________________________________________________________
Common Stock Data:
Earnings per share before
cumulative effects of
accounting changes $1.34 $1.04 $ .97 $ .87 $ .73
Cumulative effects of
accounting changes (.02)
Earnings per share 1.34 1.02 .97 .87 .73
Cash dividends per share .36 .32 .28 .24 .20
Book value per share 5.48 5.25 4.54 4.06 3.47
________________________________________________________________
Financial Position:
Total assets $3,294,895 $2,945,573 $2,216,247 $2,013,510 $1,862,689
Working capital 132,169 200,483 99,039 91,824 113,122
Long-term debt 554,092 404,476 52,510 56,056 111,503
Capitalized lease
obligations 110,919 103,764 99,159 103,039 106,949
Stockholders' equity 1,389,379 1,388,428 1,199,452 1,087,882 929,492
________________________________________________________________
Other Year End Statistics:
Number of stores 676 656 562 531 523
Number of employees:
Total 75,000 71,000 60,000 58,000 55,000
Full-time equivalents 58,000 54,000 45,000 44,000 42,000
________________________________________________________________
Refer to the "Nonrecurring Charge" and "Indebtedness" notes in Notes to
Consolidated Financial Statements regarding the 1993 charge to cover the
settlement of the Babbitt v. Albertson's lawsuit and the reduction of
interest expense due to the successful resolution of a tax issue for which
interest expense had previously been accrued.
Refer to the "Acquisition" note in Notes to Consolidated Financial Statements
regarding the 1992 acquisition from American Stores Company.
Refer to the "Income Taxes" and "Employee Benefit Plans" notes in Notes to
Consolidated Financial Statements regarding the 1992 adoption of two new
accounting standards.
Common stock data has been adjusted for the two-for-one stock splits
distributed October 4, 1993 and June 29, 1990.
Quarterly Financial Data
(Dollars in thousands except per share data - Unaudited)
First Second Third Fourth Year
____________________________________________________________________________________________
1993
Sales $2,719,633 $2,768,242 $2,733,773 $3,062,030 $11,283,678
Gross profit 661,487 672,577 668,057 789,033 2,791,154
Net earnings 74,137 75,870 62,712 126,962 339,681
Earnings per share .29 .30 .25 .50 1.34
___________________________________________________________
1992
Sales $2,296,848 $2,604,203 $2,585,137 $2,687,488 $10,173,676
Gross profit 534,459 621,392 622,469 674,532 2,452,852
Net earnings 26,053 65,962 71,495 105,707 269,217
Earnings per share .10 .25 .27 .40 1.02
___________________________________________________________
1991
Sales $2,160,211 $2,191,815 $2,129,775 $2,198,666 $8,680,467
Gross profit 500,381 518,579 509,501 553,056 2,081,517
Net earnings 58,690 58,652 59,519 80,933 257,794
Earnings per share .22 .22 .22 .31 .97
___________________________________________________________
The Company estimates the quarterly LIFO reserves which cannot be accurately
determined until year end. The LIFO method of valuing inventories increased
(decreased) net earnings as follows (in thousands except per share data):
First Second Third Fourth Year
____________________________________________________________________________________________
1993
Net earnings $(6,978) $(6,479) $9,495 $(3,962)
Earnings per share (.03) (.03) .04 (.02)
________________________________________________________
1992
Net earnings $(6,788) $(5,091) $(1,508) $5,423 $(7,964)
Earnings per share (.02) (.02) (.01) .02 (.03)
________________________________________________________
1991
Net earnings $(6,604) $(5,715) $ (381) $5,346 $(7,354)
Earnings per share (.03) (.02) .02 (.03)
________________________________________________________
The fourth quarter of 1993 was a 14-week quarter.
Net earnings and earnings per share for the third quarter of 1993 were
reduced by a net of approximately $12.4 million or $.05 per share for a
nonrecurring charge to cover the settlement of the Babbitt v. Albertson's
lawsuit and reduced interest expense for the successful resolution of a tax
issue for which interest expense had previously been accrued. Refer to the
"Nonrecurring Charge" and "Indebtedness" notes in Notes to Consolidated
Financial Statements.
Net earnings and earnings per share for the first quarter of 1992 were
reduced by approximately $37.9 million or $.14 per share for one-time
costs primarily associated with the Jewel Osco Acquisition and accounting
changes. Refer to the "Income Taxes" and "Employee Benefit Plans" notes
in Notes to Consolidated Financial Statements for effects of adopting two new
accounting standards.
Earnings per share have been adjusted to reflect the two-for-one stock split
distributed October 4, 1993.
Stockholders' Information
General Information
Address
ALBERTSON'S, INC.
General Offices
250 Parkcenter Boulevard
P.O. Box 20
Boise, Idaho 83726
Telephone: 208-385-6200
Auditors
Deloitte & Touche
Boise, Idaho
Stock Transfer Agent and
Registrar
Chemical Trust Company of
California (Chemical Trust)
Securityholder Relations
Department
50 California Street, 10th
Floor
San Francisco, California
94111
Co-Transfer Agent and
Registrar
West One Bank, Idaho
Boise, Idaho
Stockholders of Record
There were 16,000 stockholders
of record at March 31, 1994.
Annual Meeting
The 1994 Annual Meeting of the
Stockholders will be held at
10:00 a.m., Mountain Time on
Friday, May 27, 1994 in the
Eyries Room, Boise Centre on
the Grove, 850 Front Street,
Boise, Idaho.
Information Contact
Chemical Trust may be reached
toll free at 800-356-2017
between the hours of 8:30 a.m.
and 8:30 p.m., Eastern Time.
Personnel will perform the
following functions over the
telephone when a stockholder
identifies his or her account
by providing a taxpayer
identification number, the
registration name on the
securities and the address of
record:
1. Information regarding
stock transfer requirements.
2. Replacement of dividend
checks.
3. Duplicate 1099 forms and
W-9 tax certification forms
4. Transcripts of stockholder
accounts.
Requests for information on
topics not covered above
should be sent in writing to
Chemical Trust at the address
shown. Stockholders are
remided to include a reference
to Albertson's, Inc. in the
correspondence and that
changes of address must be
submitted in writing.
Form 10-K Available
A copy of Form 10-K Annual
Report filed with the
Securities and Exchange
Commission for Albertson's,
Inc. fiscal year ended
February 3, 1994 is available
to stockholders upon request
to the Secretary of
Albertson's, Inc.
Company Stock Information
The Company's stock is traded on the New York and Pacific Stock Exchanges
under the symbol ABS. An analysis of high and low stock prices by quarter
is as follows:
First Second Third Fourth Year
_____________________________________________________________________________________________________
High Low High Low High Low High Low High Low
_____________________________________________________________________________________________________
1993 29 23-3/8 29-3/4 25-1/4 29-1/4 24-1/8 28 23-3/8 29-3/4 23-3/8
1992 22-1/2 19-5/8 21-3/4 18-1/2 23-3/4 19-5/8 26-3/4 22-1/8 26-3/4 18-1/2
1991 25-3/4 18-3/8 24-1/4 18-3/4 22-1/4 17-7/8 19-7/8 16-3/8 25-3/4 16-3/8
Cash dividends per share were:
First Second Third Fourth Year
_____________________________________________________________________________________________________
1993 $.09 $.09 $.09 $.09 $.36
1992 .08 .08 .08 .08 .32
1991 .07 .07 .07 .07 .28
* Stock prices and dividend information have been adjusted to reflect the
two-for-one stock split distributed October 4, 1993.
* In March 1994, the Board of Directors increased dividends to an annual
rate of $.44 per share, an increase of 22.2% over 1993. The new
quarterly rate of $.11 per share will be paid on May 25, 1994 to
stockholders of record on May 6, 1994.
25