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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 10-Q
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Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For 13 Weeks Ended: July 31, 2003 Commission File Number: 1-6187
ALBERTSON'S, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 82-0184434
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 Parkcenter Blvd., P.O. Box 20, Boise, Idaho 83726
- ----------------------------------------------- ----------
(Address) (Zip Code)
Registrant's telephone number, including area code: (208) 395-6200
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
----- ----
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes x No
----- -----
There were 366,915,811, shares with a par value of $1.00 per share
outstanding at August 29, 2003.
Page 1
ALBERTSON'S INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Earnings Statements for the 13 weeks ended July 31, 2003 and August 1, 2002 3
Condensed Consolidated Earnings Statements for the 26 weeks ended July 31, 2003 and August 1, 2002 4
Condensed Consolidated Balance Sheets as of July 31, 2003 and January 30, 2003 5
Condensed Consolidated Cash Flow Statements for the 26 weeks ended July 31, 2003 and August 1, 2002 6
Notes to Condensed Consolidated Financial Statements 7
Independent Accountants' Report 13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALBERTSON'S, INC.
CONDENSED CONSOLIDATED EARNINGS STATEMENTS
(in millions, except per share data)
(unaudited)
13 WEEKS ENDED
------------------------------------------
July 31, August 1,
2003 2002
------------------- -------------------
Sales $9,053 $8,941
Cost of sales 6,397 6,310
------------------- -------------------
Gross Profit 2,656 2,631
Selling, general and administrative expenses 2,295 2,148
Restructuring credits and other (8) (37)
------------------- -------------------
Operating profit 369 520
Other (expenses) income:
Interest, net (105) (103)
Other, net - (14)
------------------- -------------------
Earnings from continuing operations before income taxes 264 403
Income tax expense 102 160
------------------- -------------------
Earnings from continuing operations 162 243
------------------- -------------------
Discontinued operations:
Operating loss - (17)
Gain on disposal - 37
Income tax expense - 6
------------------- -------------------
Earnings from discontinued operations - 14
------------------- -------------------
Net earnings $ 162 $ 257
=================== ===================
Earnings per share:
Basic
Continuing operations $ 0.44 $ 0.60
Discontinued operations - 0.03
------------------- -------------------
Net earnings $ 0.44 $ 0.63
=================== ===================
Diluted
Continuing operations $ 0.44 $ 0.60
Discontinued operations - 0.03
------------------- -------------------
Net earnings $ 0.44 $ 0.63
=================== ===================
Weighted average number of common shares outstanding:
Basic 368 407
Diluted 368 409
See Notes to Condensed Consolidated Financial Statements.
Page 3
ALBERTSON'S, INC.
CONDENSED CONSOLIDATED EARNINGS STATEMENTS
(in millions, except per share data)
(unaudited)
26 WEEKS ENDED
------------------------------------------
July 31, August 1,
2003 2002
------------------- -------------------
Sales $17,993 $17,862
Cost of sales 12,784 12,608
------------------- -------------------
Gross profit 5,209 5,254
Selling, general and administrative expenses 4,474 4,269
Restructuring credits and other (15) (22)
------------------- -------------------
Operating profit 750 1,007
Other (expenses) income:
Interest, net (208) (208)
Other, net 1 (17)
------------------- -------------------
Earnings from continuing operations before income taxes 543 782
Income tax expense 209 307
------------------- -------------------
Earnings from continuing operations 334 475
------------------- -------------------
Discontinued operations:
Operating loss - (467)
Gain on disposal - 33
Income tax benefit - (145)
------------------- --------------------
Loss from discontinued operations - (289)
------------------- -------------------
Earnings before cumulative effect of change in accounting principle 334 186
------------------- -------------------
Cumulative effect of change in accounting principle (net of tax $60) - (94)
------------------- -------------------
Net earnings $ 334 $ 92
=================== ===================
Earnings (loss) per share:
Basic
Continuing operations $ 0.90 $ 1.17
Discontinued operations - (0.71)
Cumulative effect of change in accounting principle (net of tax $0.15) - (0.23)
------------------- -------------------
Net earnings $ 0.90 $ 0.23
=================== ===================
Diluted
Continuing operations $ 0.90 $ 1.16
Discontinued operations - (0.71)
Cumulative effect of change in accounting principle (net of tax $0.15) - (0.22)
------------------- -------------------
Net earnings $ 0.90 $ 0.23
=================== ===================
Weighted average number of common shares outstanding:
Basic 371 407
Diluted 371 409
See Notes to Condensed Consolidated Financial Statements.
Page 4
ALBERTSON'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par values)
(unaudited)
July 31, January 30,
2003 2003
----------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 123 $ 162
Accounts and notes receivable, net 634 647
Inventories 2,974 2,973
Assets held for sale 104 120
Prepaid and other 274 366
----------------- -----------------
Total Current Assets 4,109 4,268
Land, buildings and equipment (net of accumulated depreciation and
amortization of $6,486 and $6,158, respectively) 9,147 9,029
Goodwill, net 1,399 1,399
Intangibles, net 207 214
Other assets 297 301
----------------- -----------------
Total Assets $ 15,159 $ 15,211
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,941 $ 2,009
Salaries and related liabilities 535 599
Self-insurance 258 244
Current maturities of long-term debt and capital lease obligations 215 119
Other current liabilities 492 477
----------------- -----------------
Total Current Liabilities 3,441 3,448
Long-term debt 4,750 4,950
Capital lease obligations 307 307
Self-insurance 408 367
Other long-term liabilities and deferred credits 957 942
Commitments and contingencies - -
Stockholders' Equity
Preferred stock - $1.00 par value; authorized - 10 shares; designated -
3 shares of Series A Junior Participating; issued - none - -
Common stock - $1.00 par value; authorized - 1,200 shares; issued - 367 shares
and 372 shares, respectively 367 372
Capital in excess of par 140 128
Accumulated other comprehensive loss (96) (96)
Retained earnings 4,885 4,793
----------------- -----------------
Total stockholders' equity 5,296 5,197
----------------- -----------------
Total Liabilities and Stockholders' Equity $ 15,159 $ 15,211
================= =================
See Notes to Condensed Consolidated Financial Statements.
Page 5
ALBERTSON'S, INC.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(in millions)
(unaudited)
26 WEEKS ENDED
--------------------------------------------
July 31, August 1,
2003 2002
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 334 $ 92
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 478 496
Net deferred income taxes and other 24 14
Discontinued operations noncash charges - 356
Cumulative effect of change in accounting principle - 94
Decrease (increase) in cash surrender value of insurance (1) 18
Changes in operating assets and liabilities:
Receivables, prepaid expenses and other 72 159
Inventories (2) 222
Accounts payable (53) (96)
Other current liabilities (42) (140)
Self-insurance 54 21
Other 13 (18)
------------------ ---------------------
Net cash provided by operating activities 877 1,218
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (643) (683)
Proceeds from disposal of land, buildings and equipment 29 78
Proceeds from disposal of assets held for sale 62 430
Other (5) 21
------------------ ---------------------
Net cash used in investing activities (557) (154)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (141) (155)
Payments on long-term borrowings (110) (107)
Stock purchases and retirements (108) (75)
Proceeds from stock options exercised - 15
------------------ ---------------------
Net cash used in financing activities (359) (322)
Net (Decrease) Increase in Cash and Cash Equivalents (39) 742
Cash and Cash Equivalents at Beginning of Period 162 61
------------------ ---------------------
Cash and Cash Equivalents at End of Period $ 123 $ 803
================== =====================
See Notes to Condensed Consolidated Financial Statements.
Page 6
ALBERTSON'S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
(unaudited)
NOTE A - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Albertson's, Inc. ("Albertsons" or the "Company") is incorporated under the laws
of the State of Delaware and is the successor to a business founded by J.A.
Albertson in 1939. Based on sales, the Company is one of the largest retail food
and drug chains in the world.
As of July 31, 2003, the Company operated 2,305 stores in 31 states. Retail
operations are supported by 17 major Company distribution operations,
strategically located in the Company's operating markets. The Company also
operated 225 fuel centers near existing stores.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include
the results of operations, financial position and cash flows of the Company and
its subsidiaries. All material intercompany balances have been eliminated.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments necessary to present fairly, in all
material respects, the results of operations of the Company for the periods
presented. These condensed consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and accompanying notes included in the Company's 2002
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
April 24, 2003. The results of operations for the 13 and 26 weeks ended July 31,
2003, are not necessarily indicative of results for a full year.
The Company's operating results and cash flows for the quarter ended August 1,
2002 differ from the previously reported results due to the impact of the change
in the Company's method of accounting for vendor funds, as discussed in the
Company's 2002 Annual Report on Form 10-K. The information presented in the
financial statements reflects the adoption of EITF 02-16 in the fourth quarter
of 2002, retroactive to the beginning of 2002.
The Company's Condensed Consolidated Balance Sheet as of January 30, 2003, has
been derived from the audited Consolidated Balance Sheet as of that date.
Use of Estimates
The preparation of the Company's consolidated financial statements, in
conformity with accounting principles generally accepted in the United States,
requires management to make estimates and assumptions. Some of these estimates
require difficult, subjective or complex judgments about matters that are
inherently uncertain. As a result, actual results could differ from these
estimates. These estimates and assumptions affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period.
Inventory
Net earnings reflects the application of the LIFO method of valuing certain
inventories. Quarterly inventory determinations under LIFO are based on
assumptions as to projected inventory levels at the end of the year and the rate
of inflation for the year. Albertsons recorded pretax LIFO expense of $4 and $5
for the 13 weeks ended July 31, 2003, and August 1, 2002, respectively, and $8
and $10 for the 26 weeks ended July 31, 2003, and August 1, 2002, respectively.
The Company's vendor funds inventory offset as of July 31, 2003 was $131, a
decrease of $15 from the end of the first quarter of 2003 and a decrease of $21
from the beginning of 2003. The vendor funds inventory offset as of August 1,
2002 was $135, a decrease of $7 from the end of the first quarter of 2002 and a
decrease of $23 from the beginning of 2002.
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and has adopted the disclosure-only
alternative of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-based Compensation," and SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure."
Page 7
The following table represents the effect on net earnings and earnings per share
that would have resulted if the Company had applied the fair value based method
and recognition provisions of SFAS No. 123 to stock-based employee compensation:
13 Weeks Ended 26 Weeks Ended
July 31, August 1, July 31, August 1,
2003 2002 2003 2002
--------------------------------------------- ---------------- ---------------- --------------- ----------------
Net earnings as reported $ 162 $ 257 $ 334 $ 92
Add: Stock-based compensation expense
included in reported net earnings, net of
related tax effects 4 3 8 6
Deduct: Total stock-based compensation
expense determined under fair value based
method for all awards, net of related
tax effects (12) (12) (23) (24)
--------------------------------------------- ---------------- ---------------- --------------- ----------------
Net earnings - pro forma $ 154 $ 248 $ 319 $ 74
============================================= ================ ================ =============== ================
Basic earnings per share:
As reported $ 0.44 $ 0.63 $ 0.90 $ 0.23
Pro forma 0.42 0.61 0.86 0.18
============================================= ================ ================ =============== ================
Diluted earnings per share:
As reported $ 0.44 $ 0.63 $ 0.90 $ 0.23
Pro forma 0.42 0.61 0.86 0.18
============================================= ================ ================ =============== ================
Reclassifications
Certain reclassifications have been made to the August 1, 2002 financial
statements to conform to classifications in the current quarter.
NOTE B - RECENTLY ADOPTED ACCOUNTING STANDARDS
In July 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, "Accounting for Asset Retirement Obligations." This statement addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. SFAS No. 143 became effective for the Company on January 31, 2003, and
did not have a material effect on the Company's condensed consolidated financial
statements for the 26 weeks ended July 31, 2003.
In January 2003 the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation
of Variable Interest Entities - an Interpretation of ARB No. 51." FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The provisions of this
interpretation became effective for the Company on January 31, 2003, and did not
have a material effect on the Company's condensed consolidated financial
statements for the 26 weeks ended July 31, 2003.
In May 2003 the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous guidance could
be accounted for as equity, be classified as liabilities in statements of
financial position. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and is otherwise effective for the Company
in the third quarter of 2003. The Company does not expect the adoption of SFAS
No. 150 to have a significant impact on the Company's future results of
operations or financial condition.
NOTE C - RESERVES FOR RESTRUCTURING ACTIVITIES, MARKET EXITS AND CLOSED STORES
In 2001 the Company recorded a pre-tax charge to earnings of $107 primarily for
lease settlements and severance costs in connection with the closure of 165
stores and the reduction of overhead functions (the "2001 restructuring
activities"). As of January 30, 2003, an accrual of $28 was recorded for these
settlements and costs. During the 13 week and 26 week periods ended July 31,
2003, the Company paid $2 and $4, respectively, and had favorable lease
termination settlements of $4 and $6, respectively, leaving a balance of $18 as
of July 31, 2003.
Page 8
In 2002 the Company recorded a pre-tax charge to earnings of $51 primarily for
lease settlements and severance costs in connection with the exit from four
underperforming markets (the "2002 market exits"). As of January 30, 2003, an
accrual of $11 was recorded for these settlements and costs. During the 13 week
and 26 week periods ended July 31, 2003, the Company paid $2 and $3,
respectively, leaving a balance of $8 as of July 31, 2003.
As of January 30, 2003, the Company had an accrual of $30 for closed store lease
termination costs. During the 13 week period ended July 31, 2003, the Company
had favorable lease termination settlements of $4 and paid $3. During the 26
week period ended July 31, 2003, the Company recorded additional reserves of $2,
had favorable lease termination settlements of $6 and paid $6, leaving a balance
of $20 as of July 31, 2003. The Company also sold certain closed stores in the
26 week period ended July 31, 2003 which resulted in a gain of $6 (reflected in
"Selling, general and administrative expenses" on the condensed consolidated
earnings statement).
NOTE D - INTANGIBLES
The carrying amount of intangibles was as follows:
JULY 31, JANUARY 30,
2003 2003
-------------------- --------------------
Amortizing:
Favorable acquired operating leases $231 $231
Customer lists and other contracts 56 53
-------------------- --------------------
287 284
Accumulated amortization (183) (173)
-------------------- --------------------
104 111
Non-Amortizing:
Liquor licenses 39 39
Pension related intangible assets 64 64
-------------------- --------------------
103 103
$207 $214
==================== ====================
NOTE E - CONTINGENCIES
Lawsuits, claims and other legal matters
In March 2000 a class action complaint was filed against Albertsons as well as
American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc.
and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the
Superior Court for the County of Los Angeles, California (Gardner, et al. v.
Albertson's, Inc., et al.) by bonus-eligible managers seeking recovery of
additional bonus compensation based upon plaintiffs' allegation that the
calculation of profits on which their bonuses were based improperly included
expenses for workers' compensation costs, cash shortages, premises liability and
"shrink" losses in violation of California law. In October 2001 the court
granted summary judgment against Sav-on Drug Stores, finding one of its bonus
plans unlawful under plaintiffs' liability theory. In August 2001 a class action
complaint with very similar claims, also involving bonus-eligible managers, was
filed against Albertsons as well as Lucky Stores, Inc. and American Stores
Company, wholly-owned subsidiaries of the Company, in the Superior Court for the
County of Los Angeles, California (Petersen, et al. v. Lucky Stores, Inc., et
al.). In June 2002 the cases were consolidated and in August 2002 a class action
with respect to the consolidated case was certified by the court. On August 4,
2003, notices were sent to approximately 21,000 potential class members
notifying them of the existence of the lawsuit and allowing them to voluntarily
opt out of the class. The opt out requests must be returned by potential class
members by October 10, 2003. The Company has strong defenses against this
lawsuit, and is vigorously defending it. Although this lawsuit is subject to the
uncertainties inherent in the litigation process, based on the information
presently available to the Company, management does not expect that the ultimate
resolution of this action will have a material adverse effect on the Company's
financial condition, results of operations or cash flows.
In April 2000 a class action complaint was filed against Albertsons as well as
American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc.
and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the
Superior Court for the County of Los Angeles, California (Gardner, et al. v.
American Stores Company, et al.) by assistant managers seeking recovery of
overtime pay based upon plaintiffs' allegation that they were improperly
classified as exempt under California law. In May 2001 a class action with
respect to Sav-on Drug Stores assistant managers was certified by the court. A
case with very similar claims, involving the Sav-on Drug Stores assistant
managers and operating managers, was also filed in April 2000 against the
Company's subsidiary Sav-on Drug Stores, Inc. in the Superior Court for the
County of Los Angeles, California (Rocher, Dahlin, et al. v. Sav-on Drug Stores,
Inc.) and was also certified as a class action. In April 2002 the Court of
Appeal of the State of California Second Appellate District reversed the Rocher
class certification, leaving only two plaintiffs. The California Supreme Court
has accepted plaintiffs' request for review of this class decertification. The
Gardner case is on hold pending the review by the California Supreme Court. The
Company has strong defenses against these lawsuits, and is vigorously defending
them. Although these lawsuits are subject to the uncertainties inherent in the
litigation process, based on the information presently available to the Company,
management does not expect that the ultimate resolution of these lawsuits will
have a material adverse effect on the Company's financial condition, results of
operations or cash flows.
Page 9
An agreement has been reached, and court approval granted, to settle eight
purported class and/or collective actions which were consolidated in the United
States District Court in Boise, Idaho, and which raised various issues including
"off-the-clock" work allegations and allegations regarding certain salaried
grocery managers' exempt status. Under the settlement agreement, current and
former employees who met eligibility criteria have been allowed to present their
off-the-clock work claims to a settlement administrator. Additionally, current
and former grocery managers employed in the State of California have been
allowed to present their exempt status claims to a settlement administrator. The
Company mailed notices of the settlement and claims forms to approximately
80,000 associates and former associates. Approximately 6,000 claim forms were
returned, of which approximately 5,000 were deemed by the settlement
administrator to be incapable of valuation, presumed untimely, or both. The
court is considering the status and handling of these 5,000 claims including
terms under which claimants will be permitted to cure deficient or untimely
claims. The claims administrator was able to assign a value to approximately
1,000 claims, which amount to a total of approximately $14, although the value
of many of those claims is still subject to challenge by the Company. The
Company is presently unable to determine the number of individuals who may
ultimately submit valid claims or the amounts that it may ultimately be required
to pay with respect to such claims. Based on the information presently available
to it, management does not expect that the satisfaction of valid claims
submitted pursuant to the settlement will have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
The Company is also involved in routine legal proceedings incidental to its
operations. The Company utilizes various methods of alternative dispute
resolution, including settlement discussions, to manage the costs and
uncertainties inherent in the litigation process. Management does not expect
that the ultimate resolution of these legal proceedings will have a material
adverse effect on the Company's financial condition, results of operations or
cash flows.
The statements above reflect management's current expectations based on the
information presently available to the Company. However, predicting the outcomes
of claims and litigation and estimating related costs and exposures involve
substantial uncertainties that could cause actual outcomes, costs and exposures
to vary materially from current expectations. In addition, the Company regularly
monitors its exposure to the loss contingencies associated with these matters
and may from time to time change its predictions with respect to outcomes and
its estimates with respect to related costs and exposures. It is possible that
material differences in actual outcomes, costs and exposures relative to current
predictions and estimates, or material changes in such predictions or estimates,
could have a material adverse effect on the Company's financial condition,
results of operations or cash flows.
Contingent Lease Obligations
The Company is contingently liable for certain operating leases that were
assigned to third parties in connection with various store closures and
dispositions. If any of these third parties were to fail to perform their
obligations under the lease, the Company could be responsible for the lease
obligations. The Company was notified that certain of these third parties have
become insolvent and are seeking bankruptcy protection. At July 31, 2003,
approximately 60 store leases for which the Company is contingently liable were
subject to the bankruptcy proceedings of such third parties and eight of such
had been rejected by the applicable third party. The Company has recorded a
reserve of $7, which represents the remaining minimum lease payments and other
payment obligations under the eight rejected leases, less estimated sublease
income and discounted at the Company's credit-adjusted risk free interest rate.
Based on an internal analysis of the current status of the remaining assigned
operating leases, the Company expects that any potential future losses for
rejected assigned operating leases would not have a material adverse effect on
its financial condition, results of operations or cash flows.
Page 10
Note F- Computation of Earnings Per Share
13 Weeks Ended
-------------------------------------------------------------------
July 31, 2003 August 1, 2002
BASIC DILUTED BASIC DILUTED
------------- ------------- --------------- -------------
Earnings from:
Continuing operations $ 162 $ 162 $ 243 $ 243
Discontinued operations - - 14 14
------------- ------------- --------------- -------------
Net earnings $ 162 $ 162 $ 257 $ 257
============= ============= =============== =============
Weighted average common shares outstanding 368 368 407 407
Potential common share equivalents - 2
------------- -------------
Weighted average shares outstanding 368 409
============= =============
Earning per common share and common share equivalents:
Continuing operations $0.44 $0.44 $0.60 $0.60
Discontinued operations - - 0.03 0.03
------------- ------------- --------------- -------------
Net earnings $0.44 $0.44 $0.63 $0.63
============= ============= =============== =============
Calculation of potential common share equivalents:
Options to purchase potential common shares 3 16
Potential common shares assumed purchased
with potential proceeds (3) (14)
------------- -------------
Potential common share equivalents - 2
============= =============
Calculation of potential common shares assumed
purchased with potential proceeds
Potential proceeds from exercise of options
to purchase common shares $48 $429
Common stock price used under treasury
stock method $19.84 $31.08
------------- -------------
Potential common shares assumed purchased
with potential proceeds 3 14
============= =============
Anti-dilutive shares excluded from potential
common share equivalents 29.7 12.5
============= =============
Page 11
26 Weeks Ended
-------------------------------------------------------------------
July 31, 2003 August 1, 2002
BASIC DILUTED BASIC DILUTED
------------- ------------- --------------- -------------
Earnings (loss) from:
Continuing operations $ 334 $ 334 $ 475 $ 475
Discontinued operations - - (289) (289)
Cumulative effect of change in
accounting principle - - (94) (94)
------------- ------------- --------------- -------------
Net earnings $ 334 $ 334 $ 92 $ 92
============= ============= =============== =============
Weighted average common shares outstanding 371 371 407 407
Potential common share equivalents - 2
------------- -------------
Weighted average shares outstanding 371 409
============= =============
Earning per common share and common
share equivalents:
Continuing operations $0.90 $0.90 $1.17 $1.16
Discontinued operations - - (0.71) (0.71)
Cumulative effect of change in
accounting principle - - (0.23) (0.22)
------------- ------------- --------------- -------------
Net earnings $0.90 $0.90 $0.23 $0.23
============= ============= =============== =============
Calculation of potential common share equivalents:
Options to purchase potential common shares 3 16
Potential common shares assumed purchased
with potential proceeds (3) (14)
------------- -------------
Potential common share equivalents - 2
============= =============
Calculation of potential common shares assumed
purchased with potential proceeds
Potential proceeds from exercise of options
to purchase common shares $48 $439
Common stock price used under treasury
stock method $19.58 $31.42
------------- -------------
Potential common shares assumed purchased
with potential proceeds 3 14
============= =============
Anti-dilutive shares excluded from potential
common share equivalents 29.9 12.6
============= =============
Page 12
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of Albertson's, Inc.:
Boise, Idaho
We have reviewed the accompanying condensed consolidated balance sheet of
Albertson's, Inc. and subsidiaries ("Albertsons") as of July 31, 2003, and the
related condensed consolidated earnings statements and cash flow statements for
the thirteen and twenty-six week periods ended July 31, 2003 and August 1, 2002.
These interim financial statements are the responsibility of Albertsons
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with auditing
standards generally accepted in the United States of America, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated interim financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Albertsons as of January 30, 2003, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 20, 2003, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of January 30, 2003, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
Boise, Idaho
September 3, 2003
Page 13
ALBERTSON'S, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in millions, except per share data)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
13 week period ended July 31, 2003
Sales were $9,053 and $8,941 in the 13 week periods ended July 31, 2003 and
August 1, 2002, respectively. The slight sales growth for the 13 week period
ended July 31, 2003 as compared to the prior year was generated primarily by
sales at stores opened in the past year, partially offset by a decrease in
comparable store sales, which includes sales at replacement stores, of 0.9% and
a decrease in identical store sales of 1.3%. During the 13 week period ended
July 31, 2003, the Company opened 20 combination food and drug stores, two
stand-alone drugstores and 13 fuel centers, while closing six combination food
and drug stores, six conventional stores, and two stand-alone drugstores.
Management estimates that overall inflation in products the Company sells was
approximately 0.7% over the twelve months ended July 31, 2003, as compared to
deflation of 0.5% in the twelve months ended August 1, 2002.
Gross profit, as a percentage of sales, in the 13 week period ended July 31,
2003 declined nine basis points to 29.3% as compared to the 13 week period ended
August 1, 2002. This was a result of the Company's decision to invest gross
margin in key product categories (primarily in the grocery and general
merchandise departments) and selected geographic markets to maintain market
share, as well as increased Company-wide promotional pricing. The effect of
lower pricing was partially offset by realized cost savings as part of the
Company's strategic sourcing program. The pharmacy department's gross profit as
a percentage of sales improved in 2003 versus 2002 due to increased generic
substitution.
Selling, general and administrative expenses, as a percent to sales, increased
to 25.3% for the 13 week period ended July 31, 2003, as compared to 24.0% for
the 13 week period ended August 1, 2002, primarily due to higher workers'
compensation, employee benefits, occupancy, and salaries and wages costs.
Restructuring credits during the 13 week period ended July 31, 2003 totaled $8
as compared to $37 in the corresponding period in the prior year. The decrease
in restructuring credits is primarily due to reduced activity in 2003 as opposed
to 2002 related to the Company's 2001 restructuring activities.
The decrease in other (expense) income, net of $14 for the 13 week period ended
July 31, 2003, as compared to the corresponding period in 2002, relates to
unfavorable market adjustments in the prior year to the cash surrender value of
company owned life insurance policies used to fund the Company's obligations
under deferred compensation plans for its officers, key employees and directors.
Earnings from continuing operations were $162 or $0.44 per diluted share for the
13 week period ended July 31, 2003 compared to $243 or $0.60 per diluted share
for the 13 week period ended August 1, 2002, a decrease of 33%. This decrease
was due to a decrease in identical store sales of 1.3%, a decrease in gross
margin and increases in workers' compensation, employee benefits and occupancy
costs.
The Company's effective tax rate for the 13 week period ended July 31, 2003 was
38.4% as compared to 39.4% for the 13 week period ended August 1, 2002. The
decrease in the Company's effective tax rate is primarily due to the 2002
non-deductible loss associated with company owned life insurance policies.
Net earnings were $162 or $0.44 per diluted share for the 13 week period ended
July 31, 2003, compared to net earnings of $257 or $0.63 per diluted share for
the 13 week period ended August 1, 2002. This decline was the result of the
decrease in earnings from continuing operations.
26 week period ended July 31, 2003
Sales were $17,993 and $17,862 for the 26 week periods ended July 31, 2003 and
August 1, 2002, respectively. The slight sales growth for the 26 week period
ended July 31, 2003 as compared to the prior year was generated primarily by
sales at stores opened in the past year, partially offset by a decrease in
identical store sales for the 26 week period ended July 31, 2003 of 1.3%. For
the 26 week period ended July 31, 2003, the Company opened 40 combination food
and drug stores, 14 stand-alone drugstores and 26 fuel centers, while closing 9
combination food and drug stores, 14 conventional stores, and 13 stand-alone
drugstores.
Page 14
Gross profit, as a percentage of sales, decreased 46 basis points for the 26
week period ended July 31, 2003 to 28.9% as compared to the corresponding period
in 2002. This decrease in gross profit resulted from the Company's decision to
lower sales prices in key product categories (primarily in the grocery and
general merchandise departments) and selected geographic markets to maintain
market-share, as well as increased promotional pricing Company-wide.
Selling, general and administrative expense for the 26 week period ended July
31, 2003, as a percent to sales, increased to 24.9% as compared to 23.9% in the
corresponding period in the prior year. This increase was primarily due to
increased occupancy, employee benefits, and workers' compensation costs.
Earnings from continuing operations were $334 or $0.90 per diluted share for the
26 week period ended July 31, 2003, compared to earnings from continuing
operations of $475 or $1.16 per diluted share for the 26 week period ended
August 1, 2002, a decrease of 30%. This decrease was due to a decrease in
identical store sales of 1.3%, a decrease in gross margin and an increase in
occupancy, employee benefits, and workers' compensation costs.
The decrease in other (expense) income, net of $18 for the 26 week period ended
July 31, 2003, as compared to the corresponding period in 2002, relates to
unfavorable market adjustments in the prior year to the cash surrender value of
company owned life insurance policies used to fund the Company's obligations
under deferred compensation plans for its officers, key employees and directors.
The Company's effective tax rate for the 26 week period ended July 31, 2003 was
38.4% as compared to 39.2% for the 26 week period ended August 1, 2002. The
decrease in the Company's effective tax rate is primarily due to the 2002
non-deductible loss associated with company owned life insurance policies.
Net earnings were $334 or $0.90 per diluted share for the 26 week period ended
July 31, 2003, compared to net earnings of $92 or $0.23 per diluted share for
the 26 week period ended August 1, 2002. The improvement was a result of two
charges in 2002: $289 related to a strategic decision to exit underperforming
markets, and $94 related to the adoption of a new accounting principle for the
recognition of vendor funds.
Critical Accounting Policies
The preparation of financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses and related disclosure of contingent assets and liabilities. The
accompanying condensed consolidated financial statements are prepared using the
same critical accounting policies discussed in the Company's 2002 Annual Report
on Form 10-K.
The Company's vendor funds inventory offset as of July 31, 2003 was $131, a
decrease of $15 from the end of the first quarter of 2003 and a decrease of $21
from the beginning of 2003. The vendor funds inventory offset as of August 1,
2002 was $135, a decrease of $7 from the end of the first quarter of 2002 and a
decrease of $23 from the beginning of 2002.
Recent Accounting Standards
In July 2001 the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 became effective
for the Company on January 31, 2003, and did not have a material effect on the
Company's condensed consolidated financial statements for the 26 weeks ended
July 31, 2003.
In January 2003 the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation
of Variable Interest Entities - an Interpretation of ARB No. 51." FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The provisions of this
interpretation became effective for the Company on January 31, 2003, and did not
have a material effect on the Company's condensed consolidated financial
statements for the 26 week period ended July 31, 2003.
In May 2003 the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous guidance could
be accounted for as equity, be classified as liabilities in statements of
financial position. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and is otherwise effective for the Company
in the third quarter of 2003. The Company does not expect the adoption of SFAS
No. 150 to have a significant impact on the Company's future results of
operations or financial condition.
Page 15
Liquidity and Capital Resources
Cash provided by operating activities during the 26 weeks ended July 31, 2003
was $877 compared to $1,218 for the same period in the prior year. The decrease
in 2003, as compared to 2002, is due primarily to a decrease in earnings before
discontinued operations; a decrease in receivables, prepaid expenses and other;
and an increase in inventories; partially offset by decreases in accounts
payable and other current liabilities.
Cash flow used by investing activities during the 26 weeks ended July 31, 2003
increased to $557 compared to $154 in 2002. The 2002 investing activities
included proceeds from the sale of assets (associated with the 2001
restructuring activities and the 2002 market exits) that were $417 greater than
asset sale proceeds received in 2003. The Company is continuing to implement its
2003 capital expenditure plan, which includes outlays for new stores, store
remodels, and information technology.
The Company utilizes its commercial paper and bank line programs primarily to
supplement cash required for seasonal fluctuations in working capital and to
fund its capital expenditure program. Accordingly, commercial paper and bank
line borrowings may fluctuate between reporting periods. The Company had no
commercial paper borrowings outstanding at July 31, 2003 and January 30, 2003.
The Company has three credit facilities totaling $1,400. These agreements
contain certain covenants, the most restrictive of which requires the Company to
maintain consolidated tangible net worth, as defined, of at least $3,000 and a
fixed charge coverage, as defined, of no less than 2.7 times. As of July 31,
2003, the Company was in compliance with these requirements. No borrowings were
outstanding under these credit facilities as of July 31, 2003.
The Company filed a shelf registration statement with the Securities and
Exchange Commission, which became effective in February 2001 (the "2001
Registration Statement"), to authorize the issuance of up to $3,000 in debt
securities. The Company intends to use the net proceeds of any securities sold
pursuant to the 2001 Registration Statement for retirement of debt and general
corporate purposes, including the potential purchase of outstanding shares of
Albertsons common stock. As of July 31, 2003, up to $2,400 of debt securities
remain available for issuance under the Company's 2001 Registration Statement.
The Company's Board of Directors extended the Company's stock buyback program on
December 9, 2002, authorizing, at management's discretion, the Company to
purchase and retire up to $500 of the Company's common stock beginning January
1, 2003 and ending December 31, 2003. In the first quarter of 2003, the Company
repurchased 5.3 million shares of its common stock for a total expenditure of
$108 at an average price of $20.26 per share. The Company did not repurchase any
shares of its common stock during the 13 week period ended July 31, 2003.
Contractual Obligations and Commercial Commitments
Except as disclosed in Note E to the unaudited condensed consolidated financial
statements included elsewhere in this report, there have been no material
changes regarding the Company's contractual obligations and commercial
commitments from the information provided in Note Y "Contractual Obligations and
Commercial Commitments" in the Company's 2002 Annual Report on Form 10-K.
Letters of Credit
The Company had outstanding letters of credit of $104 as of July 31, 2003,
consisting of $73 of standby letters of credit covering primarily workers'
compensation or performance obligations and $31 of commercial letters of credit
supporting the Company's merchandise import program.
Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements (including equity
method investments). Investments that are accounted for under the equity method
have no liabilities associated with them that are material to the Company.
Related Party Transactions
There were no material related party transactions during the 26 week period
ended July 31, 2003.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes regarding the Company's market risk position
from the information provided under the caption "Quantitative and Qualitative
Disclosures About Market Risk" of the Company's 2002 Annual Report on Form 10-K.
Page 16
Item 4. Controls and Procedures
The Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15e) as of July 31, 2003. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective to provide reasonable assurance
that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified by the Securities and Exchange
Commission's rules and forms. There were no changes in the Company's internal
control over financial reporting that occurred during the Company's most
recently completed fiscal quarter that materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial
reporting.
PART II. OTHER INFORMATION
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995
All statements other than statements of historical fact contained in this and
other documents disseminated by the Company, including statements regarding the
Company's expected financial performance, are forward-looking information as
defined in the Private Securities Litigation Reform Act of 1995. In reviewing
such information about the future performance of the Company, it should be kept
in mind that actual results may differ materially from those projected or
suggested in such forward-looking information since predictions regarding future
results of operations and other future events are subject to inherent
uncertainties.
These statements may relate to, among other things: investing to increase sales;
changes in cash flow; increases in insurance and employee benefit costs;
attainment of cost reduction goals; achieving sales increases and increases in
identical sales; opening and remodeling stores; and the Company's five strategic
imperatives; and are indicated by words or phrases such as "expects," "plans,"
"believes," "estimate," and "goal." In reviewing such information about the
future performance of the Company, it should be kept in mind that actual results
may differ materially from those projected or suggested in such forward-looking
information.
Important assumptions and other important factors that could cause actual
results to differ materially from those set forth in the forward-looking
information include changes in the general economy; changes in interest rates;
changes in consumer spending; actions taken by new or existing competitors
(including nontraditional competitors), particularly those intended to improve
their market share (such as pricing and promotional activities); and other
factors affecting the Company's business in or beyond the Company's control.
These factors include changes in the rate of inflation; changes in state or
federal legislation or regulation; adverse determinations with respect to
litigation or other claims (including environmental matters); labor
negotiations; the cost and stability of energy sources; the Company's ability to
recruit, retain and develop employees; the Company's ability to develop new
stores or complete remodels as rapidly as planned; the Company's ability to
implement new technology successfully; stability of product costs; the Company's
ability to integrate the operations of acquired or merged companies; the
Company's ability to execute its restructuring plans; and the Company's ability
to achieve its five strategic imperatives.
Other factors and assumptions not identified above could also cause the actual
results to differ materially from those projected or suggested in the
forward-looking information. The Company does not undertake to update
forward-looking information contained herein or elsewhere to reflect actual
results, changes in predictions, assumptions, estimates or changes in other
factors affecting such forward-looking information.
Item 1. Legal Proceedings
The Company is subject to various lawsuits, claims and other legal matters that
arise in the ordinary course of conducting business.
In March 2000 a class action complaint was filed against Albertsons as well as
American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc.
and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the
Superior Court for the County of Los Angeles, California (Gardner, et al. v.
Albertson's, Inc., et al.) by bonus-eligible managers seeking recovery of
additional bonus compensation based upon plaintiffs' allegation that the
calculation of profits on which their bonuses were based improperly included
expenses for workers' compensation costs, cash shortages, premises liability and
"shrink" losses in violation of California law. In October 2001 the court
granted summary judgment against Sav-on Drug Stores, finding one of its bonus
plans unlawful under plaintiffs' liability theory. In August 2001 a class action
complaint with very similar claims, also involving bonus-eligible managers, was
filed against Albertsons as well as Lucky Stores, Inc. and American Stores
Company, wholly-owned subsidiaries of the Company, in the Superior Court for the
County of Los Angeles, California (Petersen, et al. v. Lucky Stores, Inc., et
al.). In June 2002 the cases were consolidated and in August 2002 a class action
with respect to the consolidated case was certified by the court. On August 4,
2003, notices were sent to approximately 21,000 potential class members
notifying them of the existence of the lawsuit and allowing them to voluntarily
opt out of the class. The opt out requests must be returned by potential class
members by October 10, 2003. The Company has strong defenses against this
lawsuit, and is vigorously defending it. Although this lawsuit is subject to the
uncertainties inherent in the litigation process, based on the information
presently available to the Company, management does not expect that the ultimate
resolution of this action will have a material adverse effect on the Company's
financial condition, results of operations or cash flows.
Page 17
In April 2000 a class action complaint was filed against Albertsons as well as
American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc.
and Lucky Stores, Inc., wholly-owned subsidiaries of the Company, in the
Superior Court for the County of Los Angeles, California (Gardner, et al. v.
American Stores Company, et al.) by assistant managers seeking recovery of
overtime pay based upon plaintiffs' allegation that they were improperly
classified as exempt under California law. In May 2001 a class action with
respect to Sav-on Drug Stores assistant managers was certified by the court. A
case with very similar claims, involving the Sav-on Drug Stores assistant
managers and operating managers, was also filed in April 2000 against the
Company's subsidiary Sav-on Drug Stores, Inc. in the Superior Court for the
County of Los Angeles, California (Rocher, Dahlin, et al. v. Sav-on Drug Stores,
Inc.) and was also certified as a class action. In April 2002 the Court of
Appeal of the State of California Second Appellate District reversed the Rocher
class certification, leaving only two plaintiffs. The California Supreme Court
has accepted plaintiffs' request for review of this class decertification. The
Gardner case is on hold pending the review by the California Supreme Court. The
Company has strong defenses against these lawsuits, and is vigorously defending
them. Although these lawsuits are subject to the uncertainties inherent in the
litigation process, based on the information presently available to the Company,
management does not expect that the ultimate resolution of these lawsuits will
have a material adverse effect on the Company's financial condition, results of
operations or cash flows.
An agreement has been reached, and court approval granted, to settle eight
purported class and/or collective actions which were consolidated in the United
States District Court in Boise, Idaho, and which raised various issues including
"off-the-clock" work allegations and allegations regarding certain salaried
grocery managers' exempt status. Under the settlement agreement, current and
former employees who met eligibility criteria have been allowed to present their
off-the-clock work claims to a settlement administrator. Additionally, current
and former grocery managers employed in the State of California have been
allowed to present their exempt status claims to a settlement administrator. The
Company mailed notices of the settlement and claims forms to approximately
80,000 associates and former associates. Approximately 6,000 claim forms were
returned, of which approximately 5,000 were deemed by the settlement
administrator to be incapable of valuation, presumed untimely, or both. The
court is considering the status and handling of these 5,000 claims including
terms under which claimants will be permitted to cure deficient or untimely
claims. The claims administrator was able to assign a value to approximately
1,000 claims, which amount to a total of approximately $14, although the value
of many of those claims is still subject to challenge by the Company. The
Company is presently unable to determine the number of individuals who may
ultimately submit valid claims or the amounts that it may ultimately be required
to pay with respect to such claims. Based on the information presently available
to it, management does not expect that the satisfaction of valid claims
submitted pursuant to the settlement will have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
The Company is also involved in routine legal proceedings incidental to its
operations. The Company utilizes various methods of alternative dispute
resolution, including settlement discussions, to manage the costs and
uncertainties inherent in the litigation process. Management does not expect
that the ultimate resolution of these legal proceedings will have a material
adverse effect on the Company's financial condition, results of operations or
cash flows.
The statements above reflect management's current expectations based on the
information presently available to the Company. However, predicting the outcomes
of claims and litigation and estimating related costs and exposures involve
substantial uncertainties that could cause actual outcomes, costs and exposures
to vary materially from current expectations. In addition, the Company regularly
monitors its exposure to the loss contingencies associated with these matters
and may from time to time change its predictions with respect to outcomes and
its estimates with respect to related costs and exposures. It is possible that
material differences in actual outcomes, costs and exposures relative to current
predictions and estimates, or material changes in such predictions or estimates,
could have a material adverse effect on the Company's financial condition,
results of operations or cash flows.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Page 18
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on June 6, 2003, and the
shareholders considered and voted on the following matters:
(1) Election of Class II Directors:
Nominee Votes For Votes Withheld
------- --------- --------------
A. Gary Ames 260,150,320 80,352,432
Henry I. Bryant 259,300,248 81,202,504
Paul I. Corddry 259,954,139 80,548,613
Jon C. Madonna 327,982,375 12,520,377
Beatriz Rivera 259,969,987 80,532,765
Continuing Class III Directors (Term expiring in 2004):
Cecil D. Andrus J.B. Scott
Pamela G. Bailey Will M. Storey
Continuing Class I Directors (Term expiring in 2005):
Teresa Beck Lawrence R. Johnston
Bonnie G. Hill Peter L. Lynch
(2) Ratification of Appointment of Independent Auditors:
Votes For Votes Against Abstentions
--------- ------------- -----------
332,518,576 5,553,411 2,430,765
(3) Approval of the Albertsons Long-term Incentive Plan:
Votes For Votes Against Abstentions
--------- ------------- -----------
321,288,524 15,841,432 3,372,796
(4) Shareholder proposal regarding simple majority vote:
Votes For Votes Against Abstentions
--------- ------------- -----------
164,226,515 126,193,099 3,589,743
(5) Shareholder proposal regarding independent board chairman:
Votes For Votes Against Abstentions
--------- ------------- -----------
83,634,867 204,655,302 5,719,188
(6) Shareholder proposal regarding stock option expensing accounting methods:
Votes For Votes Against Abstentions
--------- ------------- -----------
145,812,951 138,835,122 9,361,284
Item 5. Other Information
On July 24, 2003, Peter L. Lynch resigned his positions as President, Chief
Operating Officer and member of the Board of Directors. Concurrently, Lawrence
R. Johnston, Chairman of the Board and Chief Executive Officer of the Company,
assumed the additional responsibilities of President, and the size of the Board
of Directors was decreased to twelve effective as of July 24, 2003.
Page 19
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.36.2* Letter agreement between the Company and Peter L. Lynch
dated July 24, 2003.
15 Letter re: Unaudited Interim Financial Statements
31.1 Certification of CEO Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of CFO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
*Identifies management contract
b. The following reports under Item 9. Regulation FD Disclosure on Form 8-K
were filed during the quarter ended July 31, 2003.
Current report on Form 8-K dated June 20, 2003, including the
Company's press release regarding an unsolicited "mini tender" offer.
Current report on Form 8-K dated June 5, 2003, including the Company's
press release which discussed the Company's earnings for the first
quarter of 2003 and the Company's revised 2003 earnings guidance,
intended to be included under "Item 12. Disclosure of Results of
Operations and Financial Condition" and included under Item 9 in
accordance with Securities and Exchange Commission Release No.
33-8216.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALBERTSON'S, INC.
-----------------------------
(Registrant)
Date: September 5, 2003 /S/ Felicia D. Thornton
-----------------------------
Felicia D. Thornton
Executive Vice President
and Chief Financial Officer
Page 20